Variable Pay
Compensation that fluctuates with performance, such as bonuses or commission.
Variable pay is any element of remuneration that is not fixed but varies according to individual, team or company performance. Common forms include bonuses, commission, profit share and long-term incentives.
Unlike base pay, which is guaranteed, variable pay is designed to align employees' rewards with results, motivating effort towards specific goals and allowing labour cost to flex with business performance.
Designing variable pay well means setting clear, fair and measurable criteria, avoiding perverse incentives, and communicating the scheme transparently. It should form a deliberate part of the total rewards strategy rather than an ad hoc add-on.
