Compensation Elements
Short-term incentive (STI)
Also called: STI, annual bonus, annual incentive plan, AIP
A cash bonus paid based on annual performance, typically expressed as a percentage of base salary.
Short-term incentive (STI) plans pay employees additional cash based on annual performance — usually a mix of company performance, business-unit performance, and individual performance.
STI design choices:
- Target percentage: 5–15% for early-career professionals, 15–30% for managers, 30–60% for executives, 100%+ for CEOs
- Performance metrics: revenue, EBITDA, OKR completion, individual goals
- Payout curve: typically pays 0% at threshold, 100% at target, 200% at maximum
- Eligibility: typically annual full-time employees in good standing as of payout date
STI is the largest annual variable-pay element for most professional roles below the executive level.