Ed,
Yes.
The circumstances will vary enormously from firm to firm.
Some firms stress individual performance while others stress team performance. Neither is right or wrong, what matters is that employees agree with the system adopted.
Performance related pay systems do have considerable problems as the likes of Jeffrey Pfeffer have documented at length.
Equally as you point out high performers expect to receive more than average or poor performers.
Unfortunately, in some instances it can be very difficult to judge individual performance.
Reward strategy is more an art than a science. (As wise reward specialists might be prepared to admit after a few drinks etc)
Col
colbrown.co.uk