A glossary of terms for Compensation
Variable pay: Cash compensation that is earned upon the completion of a specific task and/or meeting a goal or quota. Variable pay is often expressed as a ratio to base pay. See Variable Pay in Lattice: Important Considerations and Limitations for more details on how to use the Variable pay field.
Base pay: The fixed rate of compensation for a role that excludes any other cash compensation such as bonus, variable pay, or overtime pay. An employee’s annual salary is an example of base pay.
Bonus plan: Incentive-based compensation that is awarded based on the achievement of predefined goals or objectives. The amount earned may be dependent on a number of inputs, including individual performance, department performance, and company performance. Bonus plans are typically managed separately from commission or quota-based pay (see Variable pay).
Bonus target: The amount that an employee is eligible to earn through their company’s bonus plan. This may be expressed as a percent to their base pay (a 10% bonus calculated based on $100,000 in base pay) or as a flat monetary value ($10,000).
Bonus amount: The bonus target for an individual employee in a given period, expressed as a monetary value.
Equity refresh grant: Equity grants that are awarded to an employee above and beyond any grants that were awarded at the time of hire.
Overall budget: The total budget allocated for a compensation cycle.
On-target earnings: Total cash compensation that an employee receiving base pay and variable pay is expected to earn if they achieve 100% of their variable pay target. This does not include earnings from bonus (see Total cash).
One-time bonus: Cash compensation that is awarded on a discretionary basis and not tied to a formal incentive-based bonus plan. Also known as spot bonuses, these may be awarded for achieving a goal, demonstrating high performance, or for any other reason determined by a manager or other leader.
Promotion equity grant: Equity grants that are awarded to an employee at the time of promotion.
Total cash: Total cash compensation that an employee earns between base pay, variable pay, and bonus pay.
Manager's budget: The amount a manager is allocated to use for comp adjustments across all their eligible direct reports. This is based on sum of guidance and any additional distributions.
Compensation bands & job architecture
Compensation band: The pay range for a compensation band. A compensation band is defined by a minimum and maximum amount. They can differ between roles, levels, and pay zone.
Compa-Ratio: A calculation expresses current pay as a percentage to the Target value of a set comp band, which can be added when creating a compensation band. For example, if the Target of a comp band is $100,000 and an employee is being paid $105,000, their compa-ratio is calculated as such: $105,000 / $100,000 = 1.05. If a band does not have a Target value, Lattice will use the point halfway between the Minimum and Maximum base pay.
Note: Lattice formerly used the mathematical midpoint between the band's minimum and maximum, even when the Target does not match that value. This logic changed in November 2024 to calculate compa-ratio based on the Target.Job architecture: Framework for understanding roles and their hierarchy within a company. See What is Job Architecture? for more details.
Job function: The type of work being done by a group of employees. Examples include Product Design, Sales Development, Content Marketing
Job type: The category of career paths at a company. Examples include Support, Individual Contributor, Management, Executive.
Job level: Indicates a level, usually within a job type.
Pay zone: Used to differentiate compensation bands if the same role is compensated differently across different locations, regions, or tiers.
Compensation band name: Used to name each compensation band and make them easier to identify.
Compensation cycles
Compensation cycle: The process of reviewing and updating employee compensation.
Roles in a compensation cycle:
Participant: An employee who is in the comp cycle as eligible or ineligible for a change in compensation
Recommender: A manager responsible for making compensation change recommendations for eligible employees in the cycle. The default recommender for an eligible employee is their direct manager.
Approver: Any manager who is responsible for approving compensation recommendations from the managers who report to them, as well as recommending compensation changes for their own direct reports
Participant roles:
Eligible: Status that indicates that an employee can receive a compensation change in the cycle.
Ineligible: Status that indicates that an employee will not receive a compensation change in the cycle, but are still included in the cycle for context.
Hidden: Status that removes an employee from the compensation cycle. They will not be visible in the cycle.
Currency terms:
Company currency: The currency used by the organization as their default currency; this currency is used to set, calculate, and track budgets
Employee currency: An employee’s local currency; the currency that an individual employee is paid in
Budgeting terms:
Raise budget: The total budget allocated for merit raise increases and promotion raise increases in a compensation cycle.
Target Increase: The budget allocated to Recommenders as a percent per employee
Increase guidance: The suggested raise amount for each employee that is shared with managers to help guide decision-making. These are rules or guidelines provided to Recommenders and Approvers and do not inform budget allocation.
Promotion guidance: The suggested raise amount for an employee receiving a promotion that is shared with managers to help guide decision-making. Employees in a compensation cycle will have either Promotion Guidance or Raise Guidance depending on whether they are promoted.
Merit increase: The pay raise for any employee not receiving a promotion
Promotional increase: The pay raise for any employee getting a promotion
Target band attainment: A calculation used to determine placement in a compensation band. For example, 50% target band attainment would place an employee in the middle of a pay range.
Distributed budget: Additional funds allocated to leaders to provide additional budget for merit raise increases and promotion raise increases.
Pay effective date: The date of the employee's last pay change, typically a hire date or a last compensation change date.