Variable Pay is the Payment made by the employer to an employee for his/her additional contribution above and beyond their normal job KRA (Key Responsibility Areas). It is also known as performance pay and is paid in the form of bonus, incentive pay, or commission. It is often based on two main factors: employee performance and the company’s performance. So, most schemes evolved by companies have a target-setting and actual payout based on that combination. Variable pay is one of the five main components of total rewards in any organization and is usually a percentage of fixed pay.