Flexing your Remuneration

Variable Pay at Work

Suff P, Reilly P | HR Network Paper MP39 | Institute for Employment Studies | Nov 2004

Variable pay, sometimes referred to as 'pay at risk', is the portion of the remuneration package that has to be earned on each occasion, usually by meeting and exceeding individual, team or organisational performance criteria.

As Schuster and Zingheim, (1992) put it: 'variable pay is any form of direct pay not folded into base pay that varies according to performance'. Bonuses, performance-related pay, profit sharing and team rewards all come under the variable pay banner.

While the rewards from variable pay schemes can be substantial, employees are forced to shoulder more of the business risks - rewarding the 'upside' and penalising the 'downside' of performance.