Variable pay is given to employees who reach their performance goals. A part the employee's compensation, the variable is also determined by the performance of the organization.
It is usually paid on a quarterly, half-yearly or annual basis. Bonus, performance- linked pay and sales commissions are just a few examples of variable pay. It is one of the Salary Components but considered an ad-hoc payment.
Variable pay is a way to boost the morale and productivity of employees.