Definition
Variable DA / Performance Rating
Performance rating is the appraisal grade that determines how much of an employee's variable pay and increment is released, linking compensation to measured performance.
Your performance rating from an appraisal cycle typically drives two things: the payout percentage of your variable pay and the size of your annual increment or promotion. A higher rating means a larger share of target variable pay and a bigger raise.
Because variable pay is shown in CTC at target, a below-target rating means actual take-home is lower than the CTC implies. Rating systems vary by company, sometimes using forced distributions.
Understanding how your employer maps ratings to payouts helps set realistic expectations about take-home and the reliability of the variable component when evaluating an offer.
Related terms
- CTC vs Gross vs In-Hand SalaryCTC is the total cost a company bears for you, gross salary is your pay before deductions, and in-hand (net) salary is what actually reaches your bank after taxes and contributions.
- Retention BonusA retention bonus is an incentive paid to keep an employee from leaving, typically conditional on staying for a defined period, and is fully taxable as salary.
- Variable PayVariable pay is the part of your compensation linked to performance — individual, team or company — that is not guaranteed and can range from zero to the full target amount.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.