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Glossary of Compensation Terms
Base salary: the annual fixed rate that an individual is paid for performing a job.
Benchmark Job: a job that is 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. These are specific and realistic job specifications that relate to what, why and how work is done on a specific job, and as such are imposed on all employees equally and ensure all applicable legal and regulatory requirements are met. A benchmark job is one which would be similarly structured, regardless of the institution it works in.
Compa-Ratio: base salary divided by salary range midpoint. The compa-ratio shows where the employee’s salary falls relative to the midpoint. Because midpoint represents the target competitive market rate, the compa-ratio also expresses where the employee’s salary falls relative to the external market.
Competency: The combination of observable and measurable knowledge, skills, abilities and personal attributes that contribute to enhanced employee performance and ultimately result in organizational success. To understand competencies, it is important to define the various components of competencies.
- Knowledge is the cognizance of facts, truths and principles gained from formal training and/or experience. Application and sharing of one's knowledge base is critical to individual and organizational success.
- A skill is a developed proficiency or dexterity in mental operations or physical processes that is often acquired through specialized training; the execution of these skills results in successful performance.
- Ability is the power or aptitude to perform physical or mental activities that are often affiliated with a particular profession or trade such as computer programming, plumbing, calculus, and so forth. Although organizations may be adept at measuring results, skills and knowledge regarding one's performance, they are often remiss in recognizing employees' abilities or aptitudes, especially those outside of the traditional job design.
- Individual attributes are properties, qualities or characteristics of individuals that reflect one's unique personal makeup. Individual attributes are viewed as genetically developed or acquired from one's accumulated life experiences. Although personal characteristics are the most subjective of the components, a growing, significant body of research links specific personality traits to successful individual and organizational performance.
Essential Duties and Responsibilities is the parts of a job that cannot be assigned to another employee, or activities that an individual that holds the position must be able to perform unaided or with the assistance of a reasonable accommodation (as defined by the Americans with Disabilities Act). A duty or responsibility is considered to be essential when a position exists to perform it, when the duty or responsibility is highly specialized, and/or when there are a limited number of other employees available to perform the duty or responsibility.
Job Analysis: the systematic, formal study of the duties and responsibilities that make up job content. The job analysis process seeks to obtain important and relevant information about the nature and level of the work performed and the specifications required for an incumbent to perform the job at a competent level.
Job Evaluation: a formal process used to create a job worth hierarchy within an organization.
Job description is a summary of the essential duties and responsibilities of a job. A job description identifies the nature of the work that is performed, specific duties and responsibilities, outcomes of the performance of these duties and responsibilities, and the knowledge, skill, and abilities required to perform the job.
Job descriptions are used for the hiring process, the performance evaluation process, communication between employees and their supervisors about job responsibilities, and the identification of training needs. Job descriptions serve as a broad outline of the duties and responsibilities of a job. Job descriptions are not restrictive in the sense that they exclude the assignment of other duties and responsibilities; in fact, job descriptions can be expected to change as the work performed changes. It is the responsibility of employees to review and understand the duties and responsibilities of their job as stated in their job description. Supervisors should recognize when the broad outline of duties and responsibilities needs to be updated and work with the Office of Human Resources to revise job descriptions. It is recommended for departments to maintain specific job duty lists or desk job descriptions particular to a position which has more detail than the job description.
Job Family: a group of jobs having the same nature of work but requiring different levels of skill, effort, responsibility or working conditions (e.g., entry level versus senior level).
Job profile is work consisting of responsibilities and duties that are significantly alike to justify being covered by a single job description. A job profile may be assignable to more than one employee (i.e., the job of Administrative Assistant II is held by more than one person, but these individuals are in the same job because they all perform similar duties and responsibilities) The job profile will be used as the starting point for a job description.
Job Specifications: a description of the characteristics (i.e., knowledge, skills, abilities and competencies) required to competently perform a given job. These characteristics must be bona fide occupational qualifications as opposed to requirements that are artificially inflated and not actually required for competent job performance (e.g., requiring a college degree for all exempt jobs). Specifications, which are commonly referred to as "hiring" or "background" requirements, should be written before advertising or interviewing candidates for an open position. They should support the essential functions to reduce potential liabilities under the Americans with Disabilities Act.
Labor Market: a geographic location in which companies compete for talent. Labor markets are identified and defined by a combination of the following factors: geography (i.e., local, regional, national, international); industry; education; experience; licensing or certification required; and function or occupation. In a tight labor market with there is a high demand for certain skills, employers may be required to pay higher than the going market rate for a specific job.
Market Adjustment: a salary increase necessary to meet the estimated market level.
Market Rates: the employer's best estimate of the wage rates that are prevailing in the external labor market for a given job or occupation.
Nonexempt Employee: a term referring to an employee who is not exempt from the minimum wage and overtime pay provisions of the U.S. Fair Labor Standards Act.
Overtime Pay: under the Fair Labor Standards Act of 1938 (FLSA), nonexempt employees must be paid one-and-a-half times their normal wage rates for all hours worked in excess of 40 in any work week.
Pay Grade: a grade into which jobs of the same or similar value are grouped for compensation purposes. Usually, all jobs in a grade have the same pay range: minimum, midpoint and maximum. Salary range is assigned to each pay grade. The salary range consists of the minimum and maximum dollar amount that is paid to jobs in a specific pay grade. The salary range is based on salary survey data for the jobs in each pay grade.
Position is used to denote the unique responsibilities and duties assigned to one employee. In instances when there is only one person with a certain job title or job description, the position is the same thing as a job. If however, there are multiple individuals with the same job title/job description, then each individual is in his or her own position. In other words, a position represents a specific person and the unique duties and responsibilities that person performs.
Red Circle or Redline: an individual pay rate that is above the established range maximum assigned to the job grade. The employee is usually not eligible for further base pay increases until the salary range is adjusted due to market changes.
Salary range midpoint: the middle point of the salary range based on external market data. Individuals who are paid at or close to midpoint are closest to the market rate for the position. It also denotes a fully competent performer in the job.
Salary range minimum: the minimum amount of base salary for the position within a salary range. Individuals are deemed competitive to market as long as they are paid at or above the minimum. Typically individuals that are new to the position will be paid within the minimum to the midpoint of the salary range.
Salary range maximum: the maximum amount of base salary for the position within a salary range.
Salary structure: a pay management system that organizes base salary data according to a “line of best fit” from the market base salary data and balances the external competitiveness with internal equity and importance of each job.