Which term refers to compensation that varies based on employee or company performance?

The term that refers to compensation varying based on employee or company performance is variable pay. This form of compensation is designed to incentivize employees and align their financial rewards with their performance or that of the company. It typically includes bonuses, commission, or other forms of performance-related pay, which can fluctuate depending on factors such as individual achievements, departmental results, or overall company profitability.

Variable pay is often used as a strategic tool by organizations to motivate employees to exceed performance expectations and drive business results. By linking compensation to performance, organizations can enhance employee engagement and productivity, encouraging a results-oriented culture.

In contrast, fixed pay involves a consistent salary that does not change according to performance, while direct financial compensation encompasses all forms of remuneration, including both fixed and variable pay. Severance pay, on the other hand, is a form of compensation provided to employees upon termination of employment and is not linked to performance outcomes.