Compensation Terms & Definitions
Explore HRSoft’s comprehensive glossary of core compensation terms, explained simply and alphabetically to help HR and business leaders navigate pay practices with clarity.
Term
Definition
Benchmark Job
A job whose duties are well understood and for which market pay information is readily available from published salary surveys. It is a “standard” job that is similar across organizations and typically has many incumbents. These jobs can be used to make pay comparisons within the organization or with comparable jobs outside the organization.
Blended Job vs. Hybrid Job
These jobs are essentially the same, as both involve multifunctional responsibility across different areas and are often found within an organization’s administration and/or operations.
Call-In/Callback Pay vs. Reporting Pay
All three of these terms refer to the minimum pay guaranteed to a worker. Call-in/callback pay is the term for when an employee is recalled to work after completing their regular shift. Reporting pay, however, is the term used when a worker who is scheduled to work reports and finds no work available, or less work than can be done within the guaranteed period, usually 2 to 4 hours.
Carried Interest
A form of performance-based compensation most commonly used in investment and private equity settings. Carried interest represents a share of profits earned by fund managers above a predetermined return threshold. It is intended to reward value creation and align compensation with investor outcomes.
Comparable Worth vs. Equal Pay for Equal Work
A method of setting compensation that provides equal pay for work of equal value, comparable worth, is often used to achieve parity in pay for employees in jobs with traditionally lower pay than comparable positions. Equal pay for equal work refers to a policy denoting, or a demand for, payment of equal compensation to all employees in an establishment performing the same kind or amount of work, regardless of race, sex, or other characteristics of individual workers not related to ability or performance.
Compa-Ratio Market Reference Point
The ratio of full-time equivalent (FTE) base salary or hourly rate to the market reference point. This ratio reflects the competitiveness of an employee’s base pay relative to the market pay for comparable jobs. A ratio equal to 1.00 means an employee’s base pay is equal to the Market Reference Point.
Compa-Ratio Range Midpoint
The ratio of FTE base salary or hourly rate to the midpoint of the pay range. A ratio of 1.00 means an employee’s base pay equals the pay range midpoint.
Compa-Ratio vs. Range Penetration
The relationship of base pay to the market, expressed as a percentage of the midpoint of the salary range, is the compa-ratio. To determine compa-ratio, an employee’s base salary is divided by the midpoint of the salary range for their position. Range penetration, however, is the level of an individual’s salary compared to the total pay range. To determine range penetration, an employee’s base salary is divided by the maximum salary in his or her position’s salary range.
Compensation Philosophy
High-level view of the goals of the organization concerning compensation.
Compensation Strategy
A compensation strategy is built on three core elements: defining and understanding the talent market(s), determining the level of competitiveness, and gaining consensus on what to reward.
Compensation Surveys
Salary, pay practice, and trends surveys conducted by third-party professional organizations. These surveys adhere strictly to safe-harbor guidelines to avoid antitrust violations that may be viewed by the federal government as price fixing.
Contribution Level
The level assigned to a job based on the nature and type of contribution it makes to the university. There are six contribution levels in total. Contribution level 6 is reserved for senior leadership jobs, e.g., President, Vice Presidents, Deans.
Contribution-Level Promotion
The type of promotion in which a staff member assumes another job assigned a higher contribution level and a higher salary range.
Defined Benefit Plan vs. Defined Contribution Plan
A defined benefit plan is a retirement plan that uses a specific, predetermined formula to calculate an employee’s future benefit. In the private sector, defined benefit plans are typically funded exclusively by employer contributions. In the public sector, defined benefit plans often require employee contributions. A defined contribution plan, including 401(k), 403(b), and 457 plans, are retirement plans in which the employer makes specified contributions but the amount of the retirement benefit is not specified. Also, defined contribution plans may be wholly or partially employer-funded, but generally require employee contributions.
Deferred Compensation
An arrangement where an employee earns money in one period but receives it later, often at retirement or after leaving the company. It’s commonly used to reduce current taxable income, reward long-term service, or align incentives with company performance. Examples: 401(k) contributions, pensions, stock options, and nonqualified deferred compensation plans.
Exempt
A term referring to employees who are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA).
Frontline Worker
An employee whose primary duties involve direct, daily interaction with customers, clients, patients, or the public, or who performs essential operational tasks. Frontline workers are often the first point of service delivery and play a critical role in the day-to-day functioning of the organization.
Green Circle Rate vs. Red Circle Rate
Also known as a blue circle rate, the pay rate of a nonprobationary worker that falls below the established rate range for workers performing the same duties is considered a green circle rate. A red circle rate (aka an out-of-line rate or flagged rate) is a wage rate that exceeds the formal pay rate or range of rates for a job, often due to the employee’s long service with the company, superior skills, or other factors.
Hazard Pay vs. High Time Pay
Hazard pay is additional pay made to an individual worker or a group of workers working under dangerous or undesirable conditions. High-time pay, however, refers to extra pay for workers engaged in a job at a high altitude, though it is sometimes also applied to work below ground level with extra dangers or discomforts.
Hours Worked
Compensable work time defined under the Fair Labor Standards Act for non-exempt employees. Hours Worked may include Wait Time, On Call Time, Meal & Rest Periods, Sleep Time, Travel Time, Lectures, Meetings, Training, Preliminary and Postliminary Activities. The university is required to pay non-exempt employees for all time worked. See FastFacts FLSA Hours Worked presentation for additional information.
Internal Equity Adjustment
Pay action that is taken to correct a salary inequity among employees in the same job with comparable qualifications and performance levels.
Job Analysis
The process of analyzing jobs from which job descriptions are developed. Job analysis techniques include interviews, questionnaires, and observation.
Job Descriptions
A critical component of both compensation and selection systems, job descriptions define in writing the responsibilities, requirements, functions, duties, location, environment, conditions, and other aspects of jobs. Descriptions may be developed for jobs individually or for entire job families.
Job Evaluation
A system for comparing jobs for the purpose of determining appropriate compensation levels for individual jobs or job elements. There are four main techniques: ranking, classification, factor comparison, and the point method.
Job Evaluation Factors
Nine evaluative factors based on competencies identified by Hopkins leadership as most valued by the university. Each job is evaluated based on these nine competencies. The factors include: knowledge, problem-solving, impact, interpersonal skills, supervisory responsibility, mission/service orientation, teaming skills, innovation, and managing change.
Long-Term Incentives (LTIs)
Compensation programs designed to reward employees for sustained performance over an extended period, typically three or more years. Long-term incentives, such as performance shares, stock options, or cash-based awards, encourage retention and align employee interests with the organization’s long-term strategic goals.
Market
Identified and defined by a combination of factors, e.g., geography (local, regional, national, international), industry, and organization size. It reflects the environment in which an organization competes for qualified staff.
Market-Based Promotion
The type of promotion where a staff member assumes a job that has a higher value in the marketplace and has been assigned a higher salary range.
Market Equity Adjustment
Pay action that is taken to adjust salaries to a market-competitive level.
Market Reference Point
The average median salary that is paid to similar jobs in the marketplace, as reported in salary surveys.
Mean vs. Median
The mean is the average of a set of numbers. It is used in market pricing as a straight average—each survey source gets one “vote.” The median, or midpoint, is the value at the center of a distribution of numbers. In salary survey data, the median is the 50th percentile.
Median (50th percentile)
The middle data point in an ordered data set. When there are an even number of data points, the median is the average of the middle two data points.
Milestone
An established event for purposes of monitoring and measuring work performance, recognizing attainment of skills and competencies required by a job.
Non-benchmark Job
A job where a Market Reference Point is unavailable due to insufficient or the absence of market data. A pay range for a non-benchmark job is established by slotting the job into a pay range. Slotting involves comparing the job to similar jobs at the university and assessing how it fits within the university’s organizational hierarchy.
Non-exempt
Employees who are deemed to be non-exempt do not meet the salary basis and duties tests of the Fair Labor Standards Act (FLSA). Non-exempt employees must be paid for all hours worked and compensated for overtime. They must be paid no less than the federal and state minimum wage and must abide by specific time recordkeeping regulations.
Non-qualified Deferred Compensation (NQDC) Plans
Employer-sponsored agreements that let employees postpone receiving a portion of their income until a future date, usually retirement, separation from service, or another specified event. This is often seen when aligning executive incentives with long-term company performance and providing tax planning flexibility for high earners.
On Call Pay
Compensation made to non-exempt staff for being available to report to work when required by business operations and in accordance with Wage & Hour laws.
Pay Compression
A salary situation that occurs when differences in pay are too small to be considered equitable. May apply to differences between (1) pay of supervisors and subordinates, (2) pay of experienced and newly hired employees in the same job, (3) pay of top performers and average performers, and (4) pay of employees of comparable contribution and value.
Pay Structures
Useful for standardizing compensation practices. Most pay structures include several grades, each with a minimum salary/wage and either step increments or a grade range. Step increments are familiar in union positions, where the pay for each job is predetermined through collective bargaining.
Phantom Stock
Can also be referred to as Shadow Stock. A type of compensation that gives employees a cash bonus based on the value of the company’s shares, without granting them actual ownership. It’s a contractual agreement in which the value is tied to the company’s performance, with the employee receiving a cash payout when specific conditions are met, such as meeting performance goals or a change of control.
Premium Overtime (FLSA)
The additional pay earned by a non-exempt employee when he/she works additional hours that exceed 40 hours worked in a workweek. FLSA premium overtime is paid at the FLSA premium rate, which is 1.5 times the employee’s “regular rate” of pay.
Premium Overtime (Holiday Hours Worked)
The additional pay earned by a nonexempt employee when he/she works on a university holiday. Holiday premium overtime is paid at the holiday premium rate, which is 1.5 times the employee’s standard/base hourly rate of pay.
Premium Rate (FLSA)
The FLSA premium rate is a rate not less than one and one-half times a non-exempt employee’s “regular rate” of pay for hours worked in excess of 40 in a workweek.
Premium Rate (Holiday Hours Worked)
The holiday premium rate is a rate not less than one and one-half times a non-exempt employee’s standard/base hourly rate of pay for hours worked on a university holiday.
PSUs (Performance Stock Units)
A form of employee compensation where a company promises to deliver a variable number of shares based on achieving specific performance goals over a set period. Unlike time-based awards, the final number of shares a recipient receives can vary (often from 0% to 200%) depending on how the company performs against metrics such as earnings per share, revenue growth, or total shareholder return.
Range Spread vs. Rate Range
Also known as grade spread, range spread is the difference between the minimum and the maximum dollar amounts within a salary range or job grade, expressed as a percentage. Typically, the range spread can be as low as 20% for hourly jobs and as high as 50% or more for high-level positions. In dollar terms, the rate range is the spread of salaries for jobs assigned to the same salary grade.
Range Code
The code used for the salary range assigned to a job, i.e. OA, OB…, PA, PB…., etc.
Rate-in-Effect
(method for calculating overtime pay)
Rate-in-Effect is an alternative to the weighted-average method for calculating overtime pay for non-exempt employees, where overtime is calculated based on the standard/base hourly rate in effect when overtime is worked. To use the rate-in-effect method to calculate overtime pay, certain conditions must be met. Consult your human resources department.
Rate-in-Effect
(SAP Premium Overtime Wage Type 205M)
The “Rate in Effect” field in the SAP Premium Overtime Wage Type 205M is used to accurately process FLSA premium overtime pay in SAP when other FLSA earnings are earned, and the “regular rate” is used to calculate FLSA premium overtime. To calculate the number entered in the “Rate in Effect” field, multiply the “regular rate” by 0.5, then add the employee’s standard/base hourly rate.
Regular Rate
Under the Fair Labor Standards Act, the “regular rate” is the rate of pay used to calculate premium overtime pay for non-exempt employees. It is the hourly equivalent of all total earnings minus statutory exclusions. To name a few, it includes all hourly wages, shift differential pay, on-call pay, non-discretionary bonus/incentive pay, and employer-paid meals that are not incurred on the employer’s behalf.
Restricted Stock Units (RSUs)
A type of equity-based compensation in which employees are granted company shares that vest over time or after meeting certain conditions. RSUs provide value to employees once vested and are commonly used to support retention and reward long-term contributions.
Role
Reflects the context within which the job operates and the nature of the work performed. In the Role and Contribution Based Job Classification System, a job may be classified as an ATO (Administrative/Technical Operations), an ACRO (Academic/Clinical/Research Operations), an ATP (Administrative/Technical Professional), an ACRP (Academic/Clinical/Research Professional), or an L (Leadership) role.
Role and Contribution-Based Job Classification System
The system that the university uses to evaluate all staff jobs. Compensation staff assign each job a role, level, and salary range.
Safe Harbor Guidelines
These are Federal Trade Commission (FTC) rules that govern the exchange of pay information among organizations that can be seen as price fixing.
Salary Range
The salary range, from minimum to maximum, is assigned to a group of jobs with similar market pay rates. The spread between the minimum and maximum of the range is 75%.
Salary Surveys
Collections of salary and market data. May include average salaries, inflation indicators, cost-of-living indicators, and salary budget averages. Companies may purchase survey results from survey vendors or conduct their own salary surveys. When purchasing salary survey results from other vendors, note that surveys may be conducted within a specific industry or across industries, and within one geographical region or across different regions.
Scorecards
A tool used to track, measure, and communicate performance against key goals, metrics, or competencies. Scorecards provide a consistent framework for evaluating progress, aligning individual or team performance with organizational priorities, and supporting data-driven decision-making.
Shift Differential Pay
This is compensation given to staff for working a designated shift (evening or night) in accordance with departmental operational needs.
Standard/Base Hourly Rate
The standard or base hourly rate is the straight time rate of pay (or straight pay) per hour, exclusive of any shift, overtime, or other premium pay. The standard/base hourly rate may be used to calculate FLSA premium pay when no other FLSA earnings are earned.
Standard Overtime
The additional pay earned by a non-exempt employee when he/she works additional hours in excess of his/her standard work week, where the additional hours do not exceed 40 hours worked in a workweek. Standard overtime is paid at the employee’s standard/base hourly rate of pay.
Variable Compensation
Compensation that is not fixed and is earned based on performance, results, or specific outcomes. It may include bonuses, incentives, commissions, or other performance-based pay and is used to motivate behaviors that support organizational objectives.
See HRSoft In Action
Get a personalized demo of HRSoft to discover how our compensation solutions can help your business.