The gross salary of the employees comprises two components: fixed pay and variable pay, i.e., performance bonus. The fixed component is paid on a monthly basis, while the variable component is performance-driven and paid on a periodic basis.
Linking a part of your CTC to a complex matrix of performance, which you will find hard to comprehend, is called Variable Salary. In simple words, it's the amount of money the company isn't sure it is going to pay you or maybe thinks of paying you only if they really feel you are worth the amount at the end of a particular period.
Variable Salary means apart from the regular salary. Performance incentives, special awards, target achievement payments, etc., are payments made only after the target achievements or successful completion of projects. It is also a part of CTC.
Salary mainly consists of three major parts. The first is the fixed salary that is mentioned in your appointment letter (Basic, HRA, CCA, etc.). The second is the variable salary that varies every month. It may comprise all sorts of incentives, bonuses, allowances, etc. The third part is the deduction section, which includes all sorts of deductions like PF, ESIC, PT, etc.
Variable salary is that part of the salary that makes the CTC package attractive, the employee hopeful, and the employer confident. I hope you understand the worth of variable salary.
The variable component may also be based on the target once achieved. It may be the lowest in one month and highest in another month, i.e., there is a factor of change, i.e., variability in it.
Variable salary consists of a portion of your salary that is fixed and a portion that is commission-based on performance. Generally, the fixed portion contributes towards benefits, while the variable portion is dependent on one's performance.
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If you have any further questions or need clarification, feel free to ask.
The concept of variable salary is derived from sustenance pay and pay for performance. Any organization having clear business goals and employees' deliverables should opt for a remuneration package fixed to counter the cost of living at the employee's stature and remuneration based on the deliverables of the organization, functions, and individuals.
Normally, the variable component varies from 15% to 50%, depending on hierarchy and responsibility levels.
Hope I have been able to satisfy your query.
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