What is the definition of variable pay? Does it include commissions?
Variable pay describes any form of compensation that is performance based, usually focusing on a 12-month performance period, and which must be re-earned each year. Base salary increases do not qualify, as once an individual receives a salary increase it is an annuity that must be paid into the future. Instead, a bonus is paid in a lump-sum form and does not carry over into a subsequent compensation plan year, making it a variable expense. There are many forms of variable pay including: • Business incentives; • Cash profit sharing; • Gainsharing; • Team awards; • Individual performance bonuses; • Special recognition; • Equity; and • Commissions, which are typically reserved for sales roles in most organizations, and by definition, do also represent a form of variable pay. When we report statistics on variable pay from our Salary Increase Survey, we exclude any impact of commissions since sales roles are analyzed separately. Question: How can my organization retain top performers and ke
