Understanding Base and Variable Pay

Understanding Base and Variable Pay

In this course, HR participants will learn about base and variable pay, bonus and commissions, and commission structures. Base salary is a fixed pay that is paid out regardless of employees meeting their goals. On the other hand, variable pay is the share of sales compensation identified by the performance of the staff memeber. When staff members attain their goals (or quota), variable pay is offered as a kind of bonus, incentive pay, or commission. Together, base pay and the variable wages make up what is known as pay mix. The most common commission structure is a tiered commission plan. Under this variable pay structure, sales staff members earn a percentage based on deals closed. However, there are commission tiers that representatives carry out as they complete more deals and try to achieve the quota. Both bonuses and commissions often rely on performance. However, bonuses are commonly a lump sum, while commissions may differ from one sale representative to another according to individual performance. Employers need to be very clear about how an employee can earn variable compensation, how much they are paying, and who is eligible to receive it. If the employer communicates particular goals, levels of productivity required, or quality standards to achieve, it is critical that every employee who achieves the goal receives the reward.

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