What is an STI bonus?
STI is one of the most common abbreviations on a compensation statement and one of the least explained. Here is what it means, what decides the amount, and how to read it on your own payslip.
Short answer
STI stands for short-term incentive. It is a performance-based bonus earned over a period of one year or less — usually a financial year, sometimes a quarter. The amount is set as a percentage of your base salary (the target), then adjusted up or down by how well the company, your team and you performed against agreed goals. It is cash, it is variable, and unlike base salary it is not guaranteed.
STI on a payslip or offer letter
You will see STI in three common places, and it means something slightly different in each:
How an STI payout is actually calculated
Almost every short-term incentive plan follows the same shape. The wording changes between employers; the arithmetic rarely does.
A worked example
Base salary $95,000, target STI 15% → target payout $14,250. The company lands at 108% of plan, your individual rating is "exceeds" at 115%, and you were employed the whole year.
That is 124% of target — comfortably inside a 200% cap. Educational gross estimate only; actual take-home is lower after withholding.
Change one input and the picture changes fast. If the company had landed at 85% of plan and the plan's threshold was 90%, the company factor would be zero and the payout would be $0 — with an identical individual rating. This is the single most common reason people are surprised by their STI.
Run your own numbers in the STI/STIP calculator →
STI vs the other abbreviations
| Term | Stands for | Period | Paid as |
|---|---|---|---|
| STI | Short-term incentive | ≤ 1 year | Cash |
| STIP | Short-term incentive plan | ≤ 1 year | Cash |
| AIP | Annual incentive plan | 1 year | Cash |
| LTI / LTIP | Long-term incentive (plan) | 3–5 years | Equity, units or cash |
| Commission | — | Monthly / quarterly | Cash, per sale |
STI and STIP are used interchangeably by most employers — STI is the incentive, STIP is the document that governs it. AIP is simply an STI whose period is exactly one year. See what a STIP bonus is, what an AIP bonus is, or STI vs LTI explained.
What a typical STI target looks like
| Level | Typical STI target (% of base) |
|---|---|
| Individual contributor | 5–15% |
| Manager | 10–20% |
| Director | 20–35% |
| VP | 35–60% |
| C-suite | 60–150%+ |
Indicative ranges only. Targets vary widely by country, industry and company size, and sales roles use commission structures instead.
Related tools
Frequently asked questions
What does STI mean in salary?
STI means short-term incentive — the variable, performance-based part of your pay earned over a year or less. It is quoted as a percentage of base salary and paid in cash after the performance period closes.
What does STI mean in payroll?
On a payslip, an STI line is the gross short-term incentive paid for a completed performance period. It is treated as supplemental wages for withholding, which is why the net amount looks smaller than expected.
Is an STI bonus guaranteed?
No. STI is contingent on performance. If the company misses its threshold, the payout can be zero even when your individual rating is strong. Only base salary is guaranteed.
What is the difference between STI and STIP?
In practice, none. STI is the incentive itself and STIP is the plan document that governs it. Most employers use the two words interchangeably.
When is an STI bonus paid?
Usually two to four months after the performance period ends, once results are audited and ratings are approved — commonly March for a December year end.
Do I keep my STI if I leave?
It depends on the plan's eligibility clause. Many plans require you to be employed on the payment date, so resigning in January can forfeit a bonus earned across the whole prior year. Check that clause before handing in notice.
How is STI taxed?
As supplemental wages. Many payroll systems withhold at a flat supplemental rate rather than your normal marginal rate, so the amount withheld can be higher or lower than your eventual tax liability. This site gives gross estimates only.