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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A benefit given by a company to an employee in the form of an option to buy stock in thecompany at a stated fixed price or at a discount.
A method for measuring the annual usage of shares for incentive purposes.
The Summary Compensation Table is included in a company’s proxy statement and provides acomprehensive overview of pay levels for top-paid executive officers (typically over the last threeyears).
A type of non-qualified deferred compensation plan for key executives that provides supplementalincome to the basic retirement benefits to which the executive is otherwise entitled. SERP benefitsare payable only if vesting conditions and other requirements are met by the executive andbecome taxable upon distribution.
A type of employer-sponsored plan that is unfunded and provides deferred compensation to theeligible employee group - typically high-ranking executives and directors. These are not meant tobe tax-qualified so they don’t offer the same tax benefits of an opt-in employer-sponsored plan.
The sum of all cash payments made to an individual for services during a year of employmentincluding base pay and variable pay such as commissions, bonuses and incentives.
Non-fixed compensation that is dependent upon performance, such as commissions, bonuses orincentives. Also referred to as pay-for-performance or at-risk pay.
The order in which a private equity fund pays out distributions after investments have beenliquidated. Typically, higher-tiered creditors receive payments first, while the lower-tiered creditorsreceive payments only after the higher-tiered creditors are paid back in full, in an effort to prioritizethe highest-principal loans first because they are also likely the most expensive.