Discretionary Employer Match

This client is putting in their discretionary match on a payroll basis. They are putting in 10% of the participant's deferral amount. So if a person is putting in a flat $100 amount, they are getting a $10 match. If a person is putting in 20% of pay and it comes to $2500 then they are getting a $250 match. 

I always thought the match had to be based on percentage of compensation not deferral amount. Am I wrong or am I just confused?

I think you are just confused. A match by definition is based on the amount of the deferral. Otherwise it would just be a nonelective contribution.

What you are thinking of, maybe, is that you can limit the match to a certain percentage of compensation, or limit the amount of deferrals matched to a certain percentage of compensation. For example you could say the match is equal to 10% of deferrals up to 16% of compensation, then in your example with the 20% deferral, only $2000 of the $2500 would be matched, and the matching contribution would be $200. It's still a percentage of the amount deferred though.

What does the document say?  But that aside, the employer usually decides which percentage of ee deferrals to match.