Variable pay is a type of compensation that is tied to an employee’s performance or results. This type of pay is often used in addition to base salary, and it can be a valuable tool for motivating employees and rewarding them for their hard work.
There are many different types of variable pay, including:
- Commissions: Commissions are a percentage of the sales that an employee generates.
- Bonuses: Bonuses are one-time payments that are awarded to employees based on their performance.
- Stock options: Stock options give employees the right to buy company stock at a predetermined price.
- Performance-based pay: Performance-based pay is a type of variable pay that is tied to specific performance metrics.
The specific type of variable pay that is used will vary from company to company. However, the goal of variable pay is to provide employees with a financial incentive to perform at their best.
Here are some of the benefits of variable pay:
Motivates employees: Variable pay can motivate employees to perform at their best by giving them a financial incentive to do so.
Rewards performance: Variable pay can reward employees for their performance by giving them a financial bonus or stock options.
Aligns interests: Variable pay can align the interests of the employees with the interests of the company by giving employees a financial stake in the company’s success.