Since compensatory tools are strictly limited to the varied characteristics of labour market institutions, the economic literature has not yet developed a common terminology. When moving from one country to another, similar terms are used to refer to different tools (lump-sum bonuses, performance-related pay, incentive schemes, gain-sharing, profit-sharing, employee share ownership schemes, competence schemes). In order to qualify such a rich terminology, this work aims to analyse the numerous forms of variable wages, and to see how specific forms of performance-related pay (tools) respond to the specific needs (targets) of the firms. In fact, the relationship between employers and employees, especially in its most tangible form, the wage system, is the core of modern organisations today.
Moreover, the global market has turned the systemic efficiency of the organization into a critical success factor for a company. Given similar environments, the practice of flexible wages has become, as of late, very popular in many countries, most of the time being deemed worthy of public subsidies.
First seen as an instrument for facing the uncertainty tied to informational asymmetries, contained within the organization itself (vertical uncertainty), variable wages have been traditionally used also as a way for employers to share market uncertainty (horizontal uncertainty) with their employees. Aside from these benefits, economic literature has only recently started to investigate how particular kinds of incentive schemes may encourage a more direct participation of employees in the firm, improve the firm's competitiveness, and keep an eye on the development of competences. This last goal, indeed the most interesting, seems to be a response of great innovation to the problem of uncertainty (either vertical or horizontal).