A glossary of terms for Compensation
- Variable pay: Payment made to an employee for their additional (”above and beyond”) contributions to the company. Very common pay practice seen in Sales. A lot of times the variable is tied to hitting “key results” or “goals”.
- Base pay: The base rate of pay for a job or activity. This does not include additional payments such as bonus, overtime, variable, etc.
- Comp band: Range of compensation given for a certain role.
- Compa-Ratio: A calculation expresses current pay as a percentage to the midpoint of a set comp band. For example, if the midpoint 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
- Compensation cycle: The process of reviewing and updating employee compensation.
- Participant: An employee who is in the comp cycle as eligible or ineligible for a change in compensation
- Ineligible: A status on an employee that indicates an individual who will not be able to receive any compensation changes. This is determined through preset rules by the admin (tenure, time since last compensation change) or manually.
- Recommender: A manager who is only responsible for compensation recommendations for their direct reports
- Approver: Any manager who is responsible for approving recommendations from managers below them, as well as recommending for their own direct reports
- Raise guidance: The preferred raise amount for each employee. This is typically calculated before launching the cycle, and given to managers as a reference.
- Promotion guidance: The preferred raise amount for an employee entering a new level/ comp band based on a promotion. This is typically calculated before launching the cycle, and given to managers as a reference.
- Overall budget: The total budget allocated for a compensation cycle.
- 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.