The Full Form of STIP is Short-Term Incentive Plan.

Short-term incentives, also often referred to as annual incentives, are intended to compensate executives for achieving the company’s short-term business strategy based on achievement of goals by the board compensation committee. The nature of these goals varies depending on the type and maturity of the business, specific company strategy, market conditions and other factors. Short-term incentive metrics are typically financial in nature, such as revenue growth, return on capital or maximizing profit, and many companies also include non-financial metrics that are consistent with company strategy, such as meeting safety or quality assurance hurdles, or delivering on development of a new business or product. Annual incentive opportunity is typically expressed as a target percentage of the executive’s salary, and plans are typically constructed to provide threshold, target and maximum levels of performance which then generate corresponding threshold, target and maximum levels of pay. Generally, performance below the threshold level will result in no payout, while performance above the maximum level may be capped at the maximum payout tier (often 200% of target) to mitigate risk-taking .