Variable pay is compensation contingent on outcomes - an annual performance bonus, a sales incentive, or a company-wide payout tied to targets. It aligns reward with results and lets employers flex cost with business performance. The payout ratio (actual vs target) and clarity of the plan drive how motivating - or demoralising - it is.
In India
Commonly 10–30% of CTC for managerial roles, higher for sales. Candidates should read how much of a “₹20 L” offer is guaranteed vs at-risk.
In practice
Target variable is ₹2 L (of ₹18 L CTC). The company hits 90% of plan and the individual is rated “exceeds,” giving a 1.1 multiplier: payout ≈ ₹2 L × 0.9 × 1.1 = ₹1.98 L.