This article explains how clients can add variable compensation to employee contracts, as a financial reward for deserving EOR employees, Global Payroll direct employees, and Deel HR direct employees.
This means that in addition to general rewards like bonuses, clients can add incentive plans that are tied to tangible, performance-based results.
You must manually add variable compensation that an employee has earned as an adjustment prior to payroll cut-off date.
In this article:
What is variable compensation?
Variable compensation allows you to specify performance-related additional amounts that you can give to your employees. It is a financial incentive to reward hard work, and a job well done.
Offering additional compensation based on tangible achievements is a great way to make sure your employees are focused on the right goals.
You can add a variable compensation plan when creating a contract; or you can request a contract amendment to active contract at any time to add variable compensation.
Variable compensation can include something like an end-of-year bonus to a deserving employee, which an incentive plan is tied to an employee meeting specific, predetermined performance goals or sales targets.
Employees may be entitled to some, or all, of the variable compensation at the sole discretion of the client. It is the client's responsibility to honor the compensation if conditions are met.
Adding variable compensation to a new contract
✅ Step 1 – Create employee contract
You will enter the employee's personal details and contact information, and also provide specific details and the job role and requirements.
✅ Step 2 – Add General compensation details
You will need to add compensation details to the contract, including things like:
- Gross Annual Base salary
- Signing bonus
- Fixed contract allowances, either monthly or one-time
- Desired start date and working hours
- Vacation days
- Probation period
You can toggle on the option to add a Gross Signing Bonus, which is a one-time payment to the employee as part of their first payroll.
Click Add Variable Compensation to specify additional compensation to be included in the contract.
✅ Step 3 – Choose Variable Compensation Type
There are two options for variable compensation:
- Variable Compensation
- Incentive Plan
You can offer variable compensation as either a flat rate amount or a percentage of the employee's annual base salary.
Choose the variable compensation frequency:
- Monthly: At your discretion, the employee will be paid every month
- Quarterly: At your discretion, the employee will be paid every quarter
- Annually: At your discretion, the employee will be every year
- End of Year: At your discretion, the employee will be paid at the end of the year
You will be required to pay an additional deposit which will be based on the total amount
Select incentive plan if you wish to reward your employee with a financial reward if they meet pre-specified conditions, such as hitting a predetermined sales target or other quantifiable performance indicator.
All Incentive Plans will be reviewed and approved by our legal team. Deel may update the exact wording that will be included in your Incentive Plan agreements
If you have a specific request for an incentive plan that cannot be completed on-platform, please contact us and our team will work with you to customize your incentive plan and add it to your contract. An additional deposit may be required.
✅ Step 4 – Review and confirm compensation details
You can add additional variable compensation packages as needed to the contract.
Continue with the contract creation flow and pay the deposit.
It is your responsibility to apply a contract adjustment to honor the variable compensation if conditions are met.
Please note variable compensation must be manually added to payroll as an adjustment prior to payroll cut-off date.
[ACCORDION] What are the types of variable compensation that can be added to an employee contract?
Variable compensation allows you to describe and specify bonuses to employees, as a financial reward for a job well done.
There are two types of variable compensation that can be added to a contract:
Variable compensation: A general end-of-year bonus, for example
- Incentive-based Compensation: Compensation tied to certain, quantifiable achievements
Employees may be entitled to some, or all, of the variable compensation at the sole discretion of the client. It is your responsibility to apply a contract adjustment to honor the variable compensation if conditions are met.
[ACCORDION] How frequently can I offer variable compensation to employees?
You can add variable compensation to a payroll period every month, every quarter, annually, or as an end-of-year reward.
It is your responsibility to manually apply a contract adjustment to honor the variable compensation if conditions are met.
[ACCORDION] Can I have several variable compensation plans within a single contract?
Yes, you can add multiple variable compensation options like bonuses and incentive plans to a single contract.
Click Add variable compensation to create a new variable compensation package.