STI (Short-Term Incentive)
What is STI? Short-Term Incentive Plans Explained
A Short-Term Incentive (STI) is variable pay designed to reward performance over one year or less. The most common example is the annual performance bonus, but STIs also include quarterly bonuses, sales commissions, and spot awards.
STIs are typically tied to specific, measurable goals. They're usually expressed as a percentage of base salary, for example "target bonus of 15% with 0-200% payout based on performance."
The purpose of STIs is to drive near-term behaviour and results. They reward what happened this year. The key difference from LTIs: STIs pay cash for this year's performance. LTIs reward long-term value creation through equity that vests over years.