Variable Pay

What is Variable Pay?

Variable pay sits in the CTC but is not guaranteed. Payout depends on a mix of company performance, team metrics, and individual ratings. A typical mid-level role has 10 to 25% of CTC as variable, sales roles can go up to 40 to 50%. Companies publish a payout ratio every cycle, say 80% of target, and employees get that percentage of their target variable based on their rating. It is fully taxable as salary in the year received. TDS is deducted at the time of payout. Some firms pay variable in lump sums at year-end, others split into quarterly cycles. If you leave before payout, most policies treat the variable as forfeited unless your contract says otherwise.

Example

CTC ₹15L with 15% variable. Target variable = ₹2.25L/year. Company payout 90%, your rating 1.1x. Actual payout = 2.25L x 0.9 x 1.1 = ₹2.23L.

How Variable Pay is used

Configure variable pay as a non-fixed earning in payroll. Trigger payout based on the rating and payout ratio at cycle end. Show target vs actual on the payslip.

Variable Pay FAQs

Is variable pay guaranteed?

No. It depends on company and individual performance and the payout ratio set each cycle.

Is variable pay taxable?

Yes, fully taxable as salary in the year of receipt.

What happens if I resign before variable payout?

Most policies forfeit unpaid variable. Check your offer letter for the exact rule.