That would be a good idea, with a few considerations in mind. People don't necessarily have to push and break limitations to be good performers. I think a pilot who says, "no we cant fit your bag on" is better for that than being overweight.
Better performance in my mind would be the little things that make the bigger things better, like cleaning windows, oil spatter, straightening seat belts and making the job of the pilot after you a lot easier, after all what goes around comes around.
It amazing the difference between a person who shows initiative and goes out of their way to do the little chores that no one likes doing, some of the time little things do go un noticed but most of the time it will be appreciated.
All that being said a person does need to be an efficient operator in regards to the flying, like on time performance, passenger satisfaction if applicable etc.
However an employer must not let their opinion of ones personality get in the way of their judgment in regards to performance. You can't have a person on the 20% increase idea just because you like them more than the person who you don't like as much, who is on a standard wage or even on a lack of performance wage.
Good Idea overall, I think it would make people better workers, but there are many considerations. Might be easier like someone said to give everyone just above the award, if they are lacking performance give them a kick up the coight. That way things are kept simple but effective.
JB