Variable Pay Law and Legal Definition

Variable pay is compensation that is contingent on discretion, performance or results. It may be referred to as "pay at risk." It is pay based on performance rather than based on time spent on the job or the value of the job. The most common type of variable pay is sales commission in which the sales representative receives an award (usually expressed as a percentage of sales) for each sale. The more sales achieved, the higher the total commission income for the sales representative and the higher the revenue and profits for the organization.

For example, variable pay programs include, among others,:

  • Profit Sharing
  • Gain Sharing
  • Group Incentive
  • Recognition Award
  • Individual Incentive
  • Equity/Stock Award
  • Lump Sum Bonus
  • Key Contributor Award
  • Project/Team Incentive
  • Participative Peer Award