University of Minnesota
Office of Human Resources
http://www.umn.edu/ohr
612-625-2016

Glossary of Compensation Terms

Across-the-board increase
A wage or salary increase where either a flat rate (common number of cents/hour) or a common percentage of salary is used. Also called a General Increase.
Actual hours
The number of hours worked during a pay period, as compared to the scheduled hours.
Audit
Assessment of programs and services to determine effectiveness or efficiency.
Augmentation
Temporarily increase wages, supplemental pay.
Base pay rate
The fixed compensation paid to an employee for performing specific job responsibilities; base pay is exclusive of additional payments or allowances.
Benchmark job
A job that is commonly found and defined, used to make pay comparisons, either within the organization or to comparable jobs outside the organization. Pay data for these jobs are readily available in published surveys.
Broadbanding
pay structure that consolidates a large number of pay grades and salary ranges into much fewer broad bands with relatively wide salary ranges. These ranges typically have 100 percent or more differences between minimum and maximum (e.g. $25,000 to $50,000).
Classification
Systematic arrangement in groups or categories according to established criteria.
Compensation
A methodical approach to assigning a monetary value to employees in return for work performed. Compensation may include any or all of the following: base pay, overtime pay, commissions, stock option plans, merit pay, profit sharing, bonuses, housing allowance, vacations and all benefits. This is referred to as remuneration in some foreign countries.
Compensation Philosophy
A set of guiding principles that are based on values that drive compensation decision-making.
Exempt
Not subject to (i.e., they are exempt from) the Fair Labor Standards Act (FLSA) minimum wage and overtime provisions. Employees are typically paid on a salaried basis.
Fixed Increase Amount
Specified amount of increase based on performance level determined in advance and unchanging from employee to employee.
In-range adjustment
To adjust pay within the existing salary range.
Internal equity
Refers to the pay relationships among jobs internal to the organization.
Job description
A generic term that refers to either a classification description or a position description. It is a recognized list of functions and tasks included in a particular occupation or job describing concisely but clearly the basic components of the job, the scope of assigned responsibility, authority, and autonomy as well as identifying the essential functions of the position and describes the environment in which the work will be completed. A job description also forms the basis for an appraisal of the employee's job performance.
Labor Market
The market in which workers compete for jobs and employers compete for workers.
Lump Sum
Complete non-recurring payment consisting of a single sum of money
Market adjustment
The adjustment that is necessary for an individual or an organization to bring the individual or organization to approximate market values.
Market average
The sum of each market rate point divided by the total number market rate points reported.
Maximum rate
The highest rate reported for the salary range.
Merit Pay
A compensation system whereby base pay increases are determined by individual performance.
Midpoint
The middle value of the reported salary range.
Minimum rate
The lowest rate reported for the salary range.
Non-exempt
Subject to the minimum wage and overtime pay provisions of the Fair Labor Standards Act (FLSA).
Overtime
Each hour worked in a workweek in excess of the maximum hours applicable. This usually means hours worked in excess of 40 in a workweek. Under the Fair Labor Standards Act of 1938 (FLSA), there is no limit to the number of hours that an employee may work, either daily or weekly. It requires that overtime pay must be paid at a rate of not less than 1? times the nonexempt employee's regular rate of pay for hours worked over the maximum in a workweek.
Pay grade
Usually established within an organization, this refers to the levels or hierarchy of job and pay ranges. Also referred to as the salary structure, job grades, job-evaluation points and or policy lines.
Performance appraisal
The process by which you can evaluate employee job performance.
Performance Improvement Plans
Plan implemented by a manager/supervisor designed to provide employees with constructive feedback, facilitate discussions between an employee and his/her supervisor regarding performance-related issues, and outline specific areas of performance requiring improvement.
Rate arranged
Where a position has no formal salary range assigned but is assigned a working range based on it's comparability with other like positions.
Reclassification
Moving a job to a higher or lower range in the hierarchy of classifications because of a change in the job duties of the position.
Reward System
A formal or informal program used to recognize individual employee achievements, such as accomplishment of goals or projects or submission of creative ideas.
Total compensation
An individual's complete pay package that includes cash, benefits, and services.
Working title
An informal title for a position.