Salary Survey and Compensation Glossary

401(K) Plan - United States Internal Revenue Code Section 401(k) refers to CASH OR DEFERRED ARRANGEMENTS. These are retirement plans typically described as a defined contribution plan used within private for profit firms.

403(B) Plans - U.S. Internal Revenue Code Section 403(b) refers to Tax Sheltered ANNUITY Plans for nonprofit and public firms.

501(C)(9) Plans - A U.S. Internal Revenue Code Section that refers to self-insured funds (also called Voluntary Employee Benefit Plans). This is a trust that many self-insured organizations establish to fund their organization's insurance plans. Contributions to a 501(c)(9) trust are DEDUCTIBLE for federal

Accrual Basis - In accounting, this is the method where expense items and income are recognized as incurred or earned, even if they have not yet been received or paid. This is also called ACCRUAL METHOD. It is the opposite of CASH BASIS.

Accrual of Vacation Pay - Vacation accrual formulas determine how leave is earned and when it is credited to employees. Vacation may accrue by the hour, day, or week and may be credited per pay period, month, or year. Hourly accrual grants a specific number of hours of vacation per unit of employee work. For instance, if an employer grants two weeks of vacation per year and pays employees biweekly, employees earn 3.08 hours per pay period toward vacation, based on a 40-hour week.

Across-the-Board Increase - A wage or salary increase where either a flat rate (common number of cents/hour) or a common percentage of salary is used. Also called a General Increase.

Active Employment - Describes an individual working for an employer in a regular occupation for regular pay. Includes normal vacation, but does not extend to temporary or seasonal workers.

Actively at Work Provision - Should an employee's health insurance coverage be scheduled to commence and that employee is absent from work for certain specified reasons, the coverage will not commence until the employee returns to work.

Actual Hours - The number of hours worked during a pay period, as compared to the scheduled hours.

Affinity Provider - An Internet term related to the sharing of links. In some cases, two sites link to each other on a reciprocal basis. The term partner is not used.

Aging Survey Data - The practice of increasing market survey data by an assumed percentage, which is representative of wage movement, to bring the data to a consistent point in time. Also known as ''advancing'' or ''trending'' the data.

All-Salaried Work Force - A pay policy that makes exempt/nonexempt status ''invisible'' to workers. Under this policy, all employees are paid on a salaried basis and all pay is defined in the same terms, such as a monthly or annual salary.

Annual Bonus - Usually a lump-sum payment (cash, shares, etc.) made once a year in addition to an employee's normal salary or wage for a fiscal or calendar year. Generally nondiscretionary and not based on predetermined performance criteria or standards.

Annual Bonus Plans - A plan in which each year, usually at the end of the year, employees become eligible for an additional amount of money or other reward. Such plans may be by design or discretionary on the part of management. Most often the amount of the reward is based upon the performance of the company with the individual employee's' performance and pay taken into account. Payment may be at the time of the award or deferred to a later date, such as retirement, and may be in a form such as company stock.

Annual Incentive - Usually a lump-sum payment (cash or stock) made in addition to an employee's' normal pay for a fiscal or calendar year, based on performance (individual, business unit and/or company). May also be called an annual bonus.

Annual Information Return - In Canada, a report containing financial and other information that pension plans must file annually with the appropriate provincial or federal government.

Arbitration - For collectively bargained single employer plans, the bargaining agreement's grievance and arbitration procedure may double as a claims procedure. In non-bargained plans or in multi employer plans, an agreement to arbitrate a claim voluntarily may still be permissible, but only if the participant knows that it is neither a mandatory part of the claims procedure nor a prerequisite to court action.

Area Differential - (1) Allowance paid to compensate expatriate employees for medium-term cultural and hardship factors present in his or her country of assignment as compared to the base country. (This is also know as a hardship allowance.) (2) Allowance paid to domestic employees in some geographic areas, which is based on different average pay levels and/or cost of living.

Area Wage Surveys - These are standard survey formats used across geographic boundaries so that consistent reporting can illustrate the same jobs and their different pay in various geographic areas.

Arithmetic Mean - Arithmetic Mean (as defined by the U.S. DOL) is the rate of wages to be determined, to the extent feasible, by adding the wages paid to workers similarly employed in the area of intended employment and dividing the total by the number of such workers. This will, by definition of the term arithmetic mean, usually require computing a weighted average.

Assessor Series - Geographic, Salary, Benefit, Relocation and Executive Compensation software and databases designed to assist the compensation and benefits analyst and manager with his/her research.

Assignment of Benefits - An authorization directing an insurer to make payment directly to a provider of benefits, such as a physician or dentist, rather than to the insured.

Auto Allowance - Amounts that are reimbursed by an organization to an employee for the business use of his or her automobile.

Automatic Wage Adjustment - Automatically increasing or decreasing wages according to a specific plan formula.

Automatic Wage Progression - Automatically increasing wages after specified periods of service, until the employee reaches the top of his or her salary range. Automatic wage progression often is achieved through an automatic step-rate pay system.

Automobile Benefits - An allowance to an employee for the use of his/her own automobile, which may or may not be taxable.

Average - The average is the result of dividing the sum of two or more quantities by the number of quantities. Example: (a + b + c)/3 = the average. See also mean.

Average Frequency (of Salary Increases) - Normally calculated on a department-wide or company-wide basis. It is determined by summing up the months between increases granted for the employee groups and dividing by the number of increases and employees.

Average Hourly Earnings - Hourly pay determined by dividing hours worked per period into the total wages earned for that period.

Average Indexed Monthly Earnings - In the United States, this is the figure on which social security disability, retirement and other benefits are based. The figure is an average of the monthly earnings on which a worker has paid Social Security tax. The figure is indexed, that is, adjusted to compensate for inflation.

Average Percent Increase - Calculated by dividing the sum of salary increase amounts for all eligible employees by the eligible payroll. Both the numerator and the denominator include those who were eligible and participated but received no increase.

Average Straight-Time Hourly Earnings - Hourly pay determined by dividing the hours worked per period into the total straight-time earnings for the period (excluding overtime).

Back Pay - The amount of lost earnings accruing between the time a plaintiff terminates employment and a subsequent measuring date. Like Front Pay, it is not subject to the Civil Rights Act of 1991 $300,000 liability cap. Each can be awarded over and above any compensatory or punitive damages."

Bankruptcy - As governed by the U.S. Bankruptcy Code, the liquidation of the assets of a business or individual who has been legally judged to be insolvent. All remaining property and/or monies from the liquidation are collected and paid to creditors. When an employer is declared bankrupt, priority is usually given to secured employee claims for up to $2,000 in wages (including vacation, sick leave, and SEVERANCE PAY) earned within 90 days of the filing of a bankruptcy petition. Second priority is usually given to unsecured claims for contributions to employee benefit plans arising from services within 180 days before the petition is filed and limited to $2,000 times the number of employees in the plan. Also see REORGANIZATION.

Base Pay - The expatriate's stated home country salary before any addition of differentials, allowances or incentives for Foreign Service or required contributions. Base pay is the salary that would be paid for the position on the basis of its level.

Base Payroll - Determined by the sum of annual salaries and/or wages (base rates) paid at the opening of business on the first day of the plan year or last day of prior year, e.g., Dec. 31, before any increase.

Base Rate - The hourly amount paid for a job performed. This does not include shift differentials, benefits, overtime, incentive premiums or any other pay element other than the base rate. See also base wage rate.

Base Salary - Reflects the annualized base wage (hourly times 2080, or monthly times 12, or weekly times 52) and excludes overtime premiums, hazardous pay premiums, shift differentials, bonus payments, profit sharing, etc.

Base Wage Rate (or Base Rate) - The hourly rate or salary paid for a job performed. This does not include shift differentials, benefits, overtime, incentive premiums, or any other pay element other than the base rate.

Combination Pay Plan - Describes a pay plan that is in two parts. The first is a base salary and the second is one or any combination of cash incentive elements (e.g. commission and/or bonus).

Commission-Only Plans - Sales compensation plans where all awards are incentive based and typically calculated as a percentage of profits.

Commission-Plus-Draw Plans - Sales compensation plans where individuals are given a set amount each month, with this amount netted (subtracted from) any commission calculation.

Compensation - A methodical approach to assigning a monetary value to employees in return for work performed. Compensation may include any or all of the following: base pay, overtime pay, commissions, stock option plans, merit pay, profit sharing, bonuses, housing allowance, vacations and all benefits.

Compensation Committee - A high level committee (board of directors level) that approves pay and incentive award programs where senior management of the company are concerned.

Compensation Committee - Report A requirement of the Securities and Exchange Commission (SEC), this is an annual report to made by the Compensation and Benefits Committee. The Compensation and Benefits Committee has the responsibility for establishing compensation for a company's executives as well as for other compensation programs. Members may not be employees of the company, nor may they be involved with the executive compensation programs. The Committee takes into account information provided by independent compensation consultants.

Compensation Costs - This describes the overall cost to a company, including unforeseen and unrealized cost effects of current compensation decisions concerning the total compensation program (base pay, incentive programs and benefit plans).

Compensation Limits for Officers of Corporations - Executive pay in corporations is limited in small measure. The amount of compensation paid to executives that is DEDUCTIBLE or reimbursable to the company is no more than $1 million in compensation paid to an individual chief executive officer or the four other highest compensated officers of a corporation.

Compensation Strategy / Philosophy / Policy - This describes the intrinsic guiding factor for the application and administration of a compensation program. Such a policy would, of course ensure that a compensation program (which would include benefits and pay) would align with the company philosophy.

Compensation Total - Total Compensation is the sum of all payments made to an employee for a specific time period.

Cost of Labor - The process of establishing external pay practices, where information on labor market costs (total compensation amounts) are obtained from labor market competitors and relied upon when determining target total compensation opportunity.

Cost of Living - The cost of purchasing goods and services, as determined by the demand and supply of goods, services, and property. Typically, these costs are determined by a standard packages of terms. The cost-of-living is measured by the Consumer Price Index (CPI) which measures the change in consumer prices, as determined by the Bureau of Labor Statistics'' monthly survey. Many pension and employment contract changes are tied to changes in consumer prices to protect against inflation and reduced purchasing power. CPI components include the costs of housing, food, transportation, and electricity.

Deferred Compensation - Employers can provide future benefits to key employees through non-qualified deferred compensation arrangements without the compliance costs or nondiscrimination restrictions placed on tax-qualified plans.

Deferred Compensation Plan - Established by an employer in order to provide benefits to employees at a future date (e.g. upon the employee's' retirement).

DOL - U.S. Department of Labor.

Eligible Payroll - Established by calculating the total amount of salaries / wages of employees who, though eligible, do not receive a salary increase.

Employee Stock Option Plan (ESOP) - A contract between a company and an employee giving the employee the right to purchase a specific number of shares in the company for a fixed price, during a certain period of time. Employee Stock Option Plans should not be confused with the term EMPLOYEE STOCK OWNERSHIP PLANS (also ESOPs), which are retirement plans.

Employee Stock Ownership Plan (ESOP) - Typically, this is benefit plan that requires that an employee meet certain requirements in order to participate and that has a portion of its investments (if not all) on company stock. An Employee Stock Ownership Plan (ESOP) is a type of defined contribution retirement plan in which the account of the employee consists of company stock. There are strong incentives for companies that are closely held and in whose owners wish to diversify their holdings to enter into this type of plan with their employees. Other companies have used this type of plan to take their stock off the market and thereby avoid a takeover. ESOP's are attractive to organizations because they can borrow the money to purchase the stock from a bank and pay off the loan including interest from ongoing income. Banks in turn can exclude 50% of the interest on the loan from their taxable income.

Employee's Cost Basis - This is the amount taken away from the total amount paid to a pension beneficiary, so as to determine the part of the distribution that is taxable.

Employees - Employees are persons who are compensated for services performed and whose duties are under the control of an employer.

Employees Profit Sharing Plan (EPSP) - In Canada, this is a profit sharing species, whereby the employer makes a deposit of funds in a trust account, but is able to withdraw the amount deposited for tax purposes. Employees typically are taxed on contributions made on their behalf during the year in which the contribution is made and also taxed on interests earned, if any.

Equal Pay Act of 1963 - Makes gender based differentials in pay (wage discrimination) illegal for jobs that are similar in terms of qualification requirements and that are performed under similar working conditions

Equal Pay for Comparable Work - This doctrine goes beyond the Equal Pay Act of 1963. It states that women must be paid the same in a female dominated job as a man for a job that is substantially of the same value. This doctrine is in effect saying that job value / worth can be measured.

Equal Pay for Equal Work - The intention of this doctrine is to protect women from gender based discrimination in pay. The U.S. Equal Pay Act of 1963 embodies this principle.

Flexible Compensation - An approach to expatriate compensation. Allowances can be changed depending upon the needs and desires of the expatriate.

Form of Payment - Payments can be made by cash, certified check, cashiers or treasurer's check, or by a United States postal, bank, express, or telegraph money order.

Front Pay - The amount of lost earnings accruing between the time a plaintiff wins a legal judgment and is reinstated to his/her job or takes another job. Like back pay, front pay essentially is the equivalent of lost earnings. Neither Back Pay nor Front Pay is subject to the Civil Rights Act of 1991''s $300,000 liability cap. Each can be awarded over and above any compensatory or punitive damages."

Gainsharing - A group incentive plan where all members of a group share in the ''gain'' of an organization.

Golden Handcuffs - Rewards and penalties designed to discourage key employees from leaving a company.

Golden Parachute - A clause in an executive's employment contract specifying that he/she will receive large benefits in the event that the company is acquired and the executive's' employment is terminated. These benefits can take the form of SEVERANCE PAY, a bonus, stock options, or a combination thereof. Thus, a golden parachute provides the executive with financial protection from the possibility that the acquiring corporation will terminate the executive in order to make room for its own management team.

Gross Income - Total income produced by a property before any expenses are deducted. It is determined by subtracting various allowable deductions and payments from gross income. Itemized deductions such as medical expenses, certain interest payments, and real estate taxes are not subtracted in determining adjusted gross income.

Guaranteed Annual Wage (GAW) - A provision in a contract with an employer, guaranteeing the employee a minimum income or work over a period of one year.

Guaranteed Income Supplement (GIS) - A nontaxable monthly benefit paid to lower-income OAS recipients on the basis of family income.

Hazardous Duty Pay - Under working conditions that expose the employee to a considerably greater risk than normal, pay is above normal rate tables.

Highly Compensated Employees - Either a 5% owner or a person who earned more than $80,000 during the current or preceding year. Repeals rule treating highest paid officer as an HCE, the top-100 rule, and family aggregation rules in both the HCE definition and the $150,000 compensation cap. Discrimination in favor of this group is prohibited.

Hiring Bonus - An extra sum of money provided at time of hire to entice an applicant to accept a job offer or to make up for compensation forfeited at the previous company.

Hiring Rate - Refers to the wage or salary to which an employee is assigned upon entering the job.

Hourly - Occurring every hour or payable by the hour.

Immigration Prevailing Wage Rates - A special set of definitions exist for determining the competitive rate of pay that should be paid to immigrants who hold temporary work permits in the United States. These rules are spelled out in General Administrative Letter 2-98.

Incentive - Additional pay (above and beyond the base salary or wage) awarded to an employee.

Incentive Compensation - Rewarding the performance of an individual in an institution with added compensation, typically in the form of bonuses or percentage increments above the base salary.

Incentive Pay - This figure only includes bonus payments and profit sharing pay. Various other programs can be included in this category as well, such as: commission, gainsharing payouts, skill based pay if paid in a lump sum, other lump sum payments, goalsharing, etc.

Individual Pay Rate - A pay level assigned to an individual or to a particular position.

Individual Retirement Account (IRA) - An individual retirement account is a trust maintained for the exclusive benefit of an individual or beneficiaries that meets certain criteria. Except for rollover contributions, an IRA must provide that no contribution in excess of $2,000 for individuals

Industry Wage Surveys Surveys conducted and collected by a variety of sources to provide wage information for a wide variety of industries.

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