Variable pay is a significant element of the direct compensation package of a growing number of organizations. The trend is towards more use of variable pay, expanded eligibility and increasing prominence of variable pay in the total direct compensation package.
Variable pay is defined as “direct compensation that does not become a permanent part of base pay/salary and which may vary in amount from period to period.” Other names for variable pay include: incentive compensation, incentives, bonuses, commissions, cash awards and lump sums.
Variable pay can be in the form of short-term (one year or less) or long-term (two years or more) incentives or bonuses and employee ownership programs. “Incentives” are plans that have predetermined criteria and standards with policies for determining and allocating rewards. “Bonuses” are awards delivered at the end of the period, based on a subjective judgment as to the quality of performance and the rewards that are warranted.

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- Best Regards,
Francis
francisappoline@gmail.com