Remunerating for work outside a fixed standard or structure, usually on a case by case basis. This means that all or part of the wage is variable.
The possibilities provided within existing working conditions of remunerating either structurally or incidentally results in a large number of differentiation and variation possibilities. Variable or flexible remuneration, as opposed to structural or fixed remuneration, is exemplified by payment for overtime, piecework, units sold (commission sales) and temporary shortage on the labour market. There are also systems with wage forks – periodic, flexible increases which are paid on top of the initial wage dependent on assessment of performance. The flexible part of the wage can also be paid in addition to the basic wage, such as bonuses, emoluments, coupons and options to purchase shares. The same work may also be differentially remunerated; common forms of differentiation of remuneration are based on seniority and performance, for example.
Both employers and employees feel more and more a need for differentiation of the options in fixed employment agreements. Modern employers, in particular, need forms of remuneration that depend on achievements, as well as a testing of the proposals by both sides of industry against their effects on the competitive strength of the enterprises and on workers' participation and employment.
There has been an upgrading of performance remuneration, partly as a result of the trend to decentralize bargaining over working conditions. Possible mainsprings are the shortage on various labour markets, individualization of the desired remuneration packages and the growing influence of the employee on the job content and working conditions that allow them to attune the work to individual needs.
There is no obvious relationship between wither real wage "flexibility" or the movement in real wages and employment performance in industrialized countries in recent years. Differences in employment performance over time and between countries can be much better explained in terms of differences in growth rates of output, rather than in differences in real wage behaviour.
The workers do not demand more wage flexibility. The employer already has a wide range of possibilities, if they want to grant bonuses. Still more wage flexibility is, eventually, only about the possibility of lowering the wages or of nullifying wage increases, which leads to income insecurity.