Wether years of service or performance should be considered in rewarding system?

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Some people argu that years of services should not be considered as a factor that influences the salary and job security. while some other people hold the opinion that years of service could be an important factor which correlates to the staff's work experiences and loyalty to the company and therefore should be considered as an important factors. In my point of view, we shouldn't put too much attention to the years of service, instead we need to pay more attention to employee's actual performance in terms of efficiacy and deliveries. If a new employee is working more effectively and more productive than the old employees, we have no reason to stop the new guy to get promoted and in the end succeed the old one in salary and other aspects. With this incentive system put into the place, the organization will continue to have a vitalized environment for the new employee to compete with the old employees. Meanwhile old employee will need to continue to deliver high performance in order to maintain their level of payment.