Definition: Variable compensation refers to a remuneration strategy commonly used in sales and marketing roles, where a portion of an employee’s total earnings is tied to performance metrics or outcomes.

Unlike fixed salary, which is consistent regardless of performance, variable compensation fluctuates based on the achievement of specific goals, such as sales targets, project completions, or meeting key performance indicators (KPIs). This approach is designed to motivate and reward employees for their direct contributions to the company’s success.

Use It In a Sentence: After exceeding her quarterly sales targets, Jenna’s variable compensation significantly boosted her overall earnings for the year, reflecting her hard work and success in driving new business for the company.

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