Variable pay, often known as commission or incentive wages, is an instance of additional remuneration given to employees as a reward for great performance and achievement of goals, which might include monetary prizes or company shares. In an organization, the rationale for establishing variable compensation might vary, as it often depends on performance over time. However, other factors such as recommendations, sales, and firm earnings can all play a role.
While variable compensation is frequently added on top of an employee's base wage, it can also be included as part of their overall pay. Based on the employee's performance against the metric, the amount of variable compensation can fluctuate dramatically after each payment cycle. If the employee meets the target, they may only receive variable remuneration.
Variable pay is common in many industries, especially sales and customer service. Employees are encouraged to work harder in order to boost income for the organization by closing more transactions or serving more clients.