Can my company withhold my variable pay?

Offer letter lets management withhold variable pay at 'sole discretion'? See how to ask for clear targets, payout dates and no forfeiture after exit.

The risky clause

Up to 20 percent of CTC is variable and may be withheld, reduced or cancelled at the sole discretion of management.

Why it is dangerous

If variable pay can be cancelled for any reason, it is a bonus, not part of your real salary. Insist on written targets, a payout date and a rule for what happens if you resign after the target period but before payout. Compare your CTC on a fixed-pay basis before accepting. This is general information, not legal advice.

Safer clause to propose

Variable pay is payable on the targets set in Schedule B. Once the performance period ends, the earned amount shall be paid within 30 days, including if the Employee resigns after the period ends.

Message to send

Hi [HR Name],

Could you share the written targets and payout timeline for the variable component, and confirm earned variable pay is paid even if I resign after the performance period? Thanks, [Your Name]

Frequently asked questions

Is variable pay guaranteed?

Only if the contract makes it so. If it says 'discretion', it is not guaranteed.

Should I compare offers on fixed pay?

Yes. Fixed pay is what you can count on, so compare the guaranteed part first.

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