What is an example of variable compensation?

A monthly salary is a fixed form of compensation that does not vary based on performance or output. It remains constant regardless of the employee's productivity level, making it a form of fixed compensation rather than variable.

An hourly wage is also a fixed form of compensation, where employees are paid a set amount for each hour worked. While it may vary with the number of hours worked, it does not fluctuate based on individual performance outcomes or achievements, distinguishing it from variable compensation methods.

A piecework plan pays employees based on the amount of work they complete, which can represent a form of variable compensation. However, it is often associated with specific metrics of productivity rather than performance evaluations, making it less directly related to employee merit compared to merit pay.