Compensation Dictionary
A COMPILATION OF KEY COMPENSATION TERMS
In an effort to provide our readers with valuable resources, we have put together this dictionary of key compensation terms that will be helpful to anyone in the compensation field. Here you will find all the terms you need to know to have a good grasp on the language of compensation.
The Compensation Dictionary is also available as a PDF.
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An employee that is not exempt from the Fair Labor Standards Act (FLSA) requirements and isentitled to receive overtime pay of at least one-and-a-half times their hourly rate when for anyhours worked beyond 40 in a given week.
A type of deferred compensation also called an NQDC plan or a 409A plan that is not protectedby the Employee Retirement Income Security Act (ERISA) and could, therefore, put the funds atrisk if the company holding the employee’s NQDC declares bankruptcy or is sued.
The calculation to determine the dilutive effect on existing shareholders when allocating additionalshares to a share-based incentive plan.
A compensation structure based on individual or company performance during a given time frame.
A level within a pay range in which multiple roles with similar internal and market value can begrouped into.
The process in which a group of companies of similar size, industry, revenue and geographicallocation are analyzed to compare and establish reasonable and competitive compensation levels.
A share of company stock vested upon achievement of company-wide, previously-definedperformance objectives over a multi-year period (typically three years).
Refers to plans in which vesting only occurs once performance-related goals and specifiedconditions are met.
Rights, privileges, benefits, or advantages outside of regular salary or wages (ex. health insurance,automotive allowance); also referred to as “perks.”
A benefit plan offered to employees (upper level executives) that provides stock ownershipbenefits without giving them any actual company stock. Phantom stock follows the fluctuationsof the company’s actual stock and results in higher or lower payouts as stock prices rise or fall.Phantom stock plans may be tied to performance metrics and only pay out if certain targets aremet. Like other forms of stock-based compensation, phantom stock plans serve to align employeeand shareholder interests while incentivizing and retaining key employees.