Fixed salary and variable salary are two components of an employees pay. Fixed pay is a guaranteed amount that an employee receives every month or year, regardless of their job performance. It provides job security but may not motivate high-performing employees. On the other hand, variable pay is performance-based and may fluctuate depending on the employees performance, the achievement of targets, or the companys overall performance. It is given at regular intervals, not necessarily monthly, and is defined in the employees offer letter. Variable pay can include bonuses, commissions, profit-sharing, and other incentives. The proportion of fixed and variable pay in an employees salary is company-specific and can vary depending on the companys policies and employment agreement.
The main difference between fixed and variable salary is their structure. Fixed salary is a set amount of money an employee receives irrespective of their performance or the companys profitability. In contrast, variable salary is performance-based and may fluctuate depending on the employees performance, the achievement of targets, or the companys overall performance.
Ultimately, which salary structure works best for an employee depends on their personal preferences and career goals. By understanding both fixed and variable salary structures, employees can make informed decisions about their career and earning potential.
