This article explains how clients can add variable compensation to employee contracts, as a financial reward for deserving EOR employees and Global Payroll direct employees.
We offer two types of variable compensation: Variable Compensation and Incentive Plans.
This means that in addition to general rewards like bonuses, clients can add incentive plans that are tied to tangible, performance-based results.
In this article:
What is Variable Compensation?
Adding Variable Compensation to an Employee Contract
What is Variable Compensation?
Variable compensation allows clients to specify performance-related additional amounts that they can give to their 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 employees are focused on the right goals.
Clients can add a variable compensation plan when creating a contract or can request a contract amendment to active contracts at any time to add variable compensation.
Variable compensation can include something like an end-of-year bonus to a deserving employee, in which an incentive plan is tied to an employee meeting specific, predetermined performance goals or sales targets.
Adding Variable Compensation to a New Contract
✅ Step 1 – Create an employee contract
Clients 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
Clients 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
Clients 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
Variable Compensation
Clients 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 the client's discretion, the employee will be paid every month
- Quarterly: At the client's discretion, the employee will be paid every quarter
- Annually: At the client's discretion, the employee will be every year
- End of Year: At the client's discretion, the employee will be paid at the end of the year
Incentive Plan
Select an incentive plan to reward an employee with a financial reward if they meet pre-specified conditions, such as hitting a predetermined sales target or other quantifiable performance indicator.
Incentive Plans may need to be reviewed and approved by our legal team. Deel may need to update the exact wording that will be included in the Incentive Plan agreements, and we will update the clients on any changes.
If there is a specific request for an incentive plan that cannot be completed on-platform, please contact us and our team will work together with the client to customize their incentive plan and add it to the contract. An additional deposit may be required.
✅ Step 4 – Review and confirm compensation details
Clients can add additional variable compensation packages as needed to the contract.
Continue with the contract creation flow and pay the deposit.
It is the client's responsibility to apply a contract adjustment to honour the variable compensation if conditions are met.
Please note variable compensation must be manually added to the payroll as an adjustment prior to the payroll cut-off date.
FAQs
[ACCORDION] Does Deel review an employee's incentive plan and apply the bonus automatically if conditions are met?
No, the client must manually add the variable compensation that an employee has earned as a payroll adjustment prior to the cut-off date.
Employees may be entitled to some, or all, of the variable compensation at the client's sole discretion. Deel is not involved in a review, and we don't offer arbitration if there is a disagreement on whether a quantifiable performance indicator has indeed been met.
It is the client't responsibility to apply a contract adjustment to honour the variable compensation if conditions are met.
[ACCORDION] How frequently can variable compensation be offered to employees?
Clients can add variable compensation to a payroll period every month, every quarter, annually, or as an end-of-year reward.
It is their responsibility to manually apply a contract adjustment to honour the variable compensation if conditions are met.
[ACCORDION] How to add a variable compensation plan to an active employee contract?
Variable compensation details are contractual, and therefore any changes need to be submitted as a contract amendment.
Some contract edits can be processed immediately if the employee agreement is not yet in effect; or, if the changes are considered to be beneficial to the employee.
Adding variable compensation to a contract is a request that can be applied instantly if it is considered to be an upgraded benefit to the employee's terms.
Amendments are only required for modifying signed agreements. Clients don’t need an amendment to edit an agreement if the Work Order Form and Employment Agreement have not yet been signed.
[ACCORDION] Can the client make changes to a variable compensation plan after the contract is active?
Variable compensation details are contractual, and therefore any changes need to be submitted as a contract amendment.
Amendments are only required for modifying signed agreements. Clients don’t need an amendment to edit an agreement if the Work Order Form and Employment Agreement have not yet been signed.
Variable Compensation amendment requests can be processed immediately only when the employee agreement is not yet in effect; or, if the requested change is considered to be beneficial to the employee.
If the requested change to the Variable Compensation is considered to be a reduction in the employee’s terms, the request will be reviewed internally and processed as an ‘advanced change.’ This review may take up to five business days.
[ACCORDION] Can clients have several variable compensation plans within a single contract?
Yes, clients 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.
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