Compensation terms, explained simply.
From compa-ratio to job architecture, understand the terminology behind compensation and total rewards.
B
Base Salary
The fixed amount an employee earns for performing their job, excluding bonuses, incentives and other forms of compensation.
Benchmark Job
A job that can be reliably matched to jobs in external compensation surveys because its responsibilities are commonly understood across organizations.
C
Compa-Ratio
A measure comparing an employee's salary with the midpoint of their salary range.
Formula: Employee Salary / Salary Range Midpoint
Compensation Philosophy
A set of principles that explains how an organization approaches employee pay, including market positioning, internal equity, performance, affordability and governance.
J
Job Architecture
A structured framework used to organize jobs into job families, subfamilies, career streams and levels.
Job Evaluation
A systematic process for determining the relative value of jobs within an organization.
Job Family
A group of jobs that perform related types of work or require similar professional expertise.
Job Level
A defined level of work that reflects factors such as scope, complexity, knowledge, decision-making and organizational impact.
M
Market Median / P50
The compensation level at which approximately half of market observations fall below and half fall above.
P
P75
The 75th percentile of a market distribution. Approximately 75% of observations fall below this level and 25% fall above.
Pay Equity
The principle and, in some jurisdictions, legal requirement that compensation practices should not create unjustified pay differences. Legal definitions and obligations vary by jurisdiction.
Pay Transparency
The practice of providing greater visibility into compensation information, processes, ranges or decisions. Requirements vary by jurisdiction.
R
Range Penetration
A measure of how far an employee's salary has progressed between the minimum and maximum of a salary range.
Formula: (Employee Salary - Range Minimum) / (Range Maximum - Range Minimum)
S
Salary Range
The minimum, midpoint and maximum compensation established for a job or group of jobs.
T
Total Compensation
The combined value of base salary and other direct forms of compensation such as incentives, bonuses and equity.
Total Rewards
A broader concept that may include compensation, benefits, retirement programs, wellbeing programs, recognition, development and other elements of the employee value proposition.