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Compensation Glossary

The following terms are commonly used when discussing compensation terminology.

Base Pay

The rate paid by the hour, week, month, or year to an individual for the job performed. This does not include shift differentials, overtime, incentives, benefits, or any other pay element other than base pay.

Benchmark Job

A job commonly found in the marketplace which is used as a reference point for making pay comparisons.  Pay data for these jobs are readily available in published salary surveys.

Career Track

A progression that describes the nature of work being performed. Three Career Tracks have been defined for OU:

  • Technical & Administrative Support
  • Individual Contributor
  • Management

Compa Ratio

The ratio between current pay to the salary range midpoint assigned to the job.  A compa ratio is used to determine the relationship of an employee's pay to the midpoint or some other control point of the salary range. It is also used to assess how an employee's pay is moving through the assigned salary range.

Compensation Strategy

A set of principles that guide the design and administration of a compensation system toward supporting the organization’s strategy, culture and the achievement of organizational objectives.

Competencies

Basic units of knowledge, skills and abilities employees must acquire or demonstrate in order to successfully perform work.

Compression

Pay differentials too small to be considered equitable. In some organizations, the term may apply to differences between:

  • Pay of supervisor and subordinates;
  • Pay of experienced and newly hired employees in the same job;
  • Midpoints in successive grades.

Equal Employment Opportunity Commission (EEOC)

A commission of the federal government charged with enforcing the provisions of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Equal Pay Act of 1963, and other fair employment practices legislation.

Equal Pay Act of 1963

An amendment to the Fair Labor Standards Act of 1938 prohibiting gender-related pay differentials on jobs that are substantially equal in skill, effort, responsibility, and working conditions unless the differences exist due to a seniority, merit-  or production-based pay system, or any other job-related factor other than gender.

Exempt

Employees exempt from the overtime provisions of the Fair Labor Standards Act. Generally this group includes executives, administrative/professional employees, and outside sales.

External Equity

A measure of an organization’s pay levels or salary ranges compared to that of its labor market competitors. External equity implies that the employer pays wages that are competitive with prevailing external market pay rates, as determined by market pricing.

Fair Labor Standards Act (FLSA)

A federal law governing minimum wage, overtime pay, equal pay for men and women in the same types of jobs, child labor and record-keeping requirements. Contained within this law are the categories of exempt and non-exempt work. Exempt employees are those whose jobs are not subject to minimum wage or overtime payment provisions of the FLSA. Non-exempt employees are those whose jobs are subject to the overtime pay provision of the FLSA.

Geographic Differentials

Establishing different pay levels for the same job based on differences in cost of living or cost of labor for a specific geographic region.

Hybrid Job

A job that encompasses multi-functional responsibility for a combination of different areas that are all important and necessary for the role (e.g., incumbent wears multiple hats) and typically represents two or more separate jobs (e.g., financial analyst and trainer).

Incentive Compensation

A reward that compensates an employee for high performance or for achievement above and beyond the defined normal job requirements.

Internal Equity

A standard that fairly establishes a pay level that corresponds to each job's relative value to the organization.

Job

The total collection of tasks, duties and responsibilities assigned to one or more individuals whose work has the same nature and level of work.

Job Classification

The assignment of a job to a hierarchical structure and salary grade based on job evaluation of job content and the going rate for comparable jobs in the external labor market.

Job Description

A summary of the most important features of a job, including the general nature of the work performed (essential duties and responsibilities) and level (e.g., skills, effort, responsibility and working conditions) of the work performed. It typically incudes job specifications that detail employee characteristics required for competent performance of the job. A job description describes and focuses on the job itself, not on any specific individual who might fill the job.

Job Evaluation

A formal process to determine the relative value to be placed on various jobs within the organization. The end result of job evaluation consists of an assignment of jobs to a hierarchy of grades.

Job Family

A group of jobs involving similar types of work and requiring similar training, skills, knowledge and expertise.  The Job Family concept helps organize related jobs for purposes of pay, career progression and performance management.

Job Family Examples:

  • Human Resources
  • Information Technology
  • Library Services

Job Family Grid

Descriptions of the levels of work being performed within a Job Family and across the relevant Career Tracks

Level Guide

Descriptions of level requirements and responsibilities within the 3 Career Tracks; Career Track Level Guides describe the general leveling of jobs within each track throughout the University.

Market Analysis

An annual process conducted each fall by University HR’s Staff Compensation team to analyze job trends and salary levels/rates paid in the market. Market data reflect the geographic regions and the types of industries from which we recruit. These may include for-profit and not-for-profit organizations, local and national organizations, and higher education institutions as well as general industry firms. Results of the market analysis process are used to make an annual recommendation for Stanford’s Staff Compensation Program.

Market Rate

Rate of pay for each job based on the aggregate, representative market data from salary surveys.

Market Pricing

Relative to compensation, the technique of establishing pay structures almost exclusively through matching pay for a very large percentage of jobs with the rates paid in the relevant external market.

Midpoint

The salary that represents the middle of a given salary grade’s salary range.

Nonexempt

Employees who are subject to the minimum wage and overtime pay provisions of the FLSA.

Salary Grade

A specific component in a salary structure that groups jobs for pay policy application. All jobs in a salary grade have the same salary range: minimum, midpoint and maximum.

Salary Range

The range of pay rates, from minimum to maximum, established for a salary grade or classification. Typically used to set individual employee pay rates, the range reflects the acceptable lower and upper bounds of pay for jobs within particular salary grades.

Salary Structure

The array and hierarchy of salary grades and the associated pay ranges established for different jobs within an organization.

Salary Survey

The gathering, summarizing and analysis of relevant market data on wages and salaries paid by other employers for selected key classes of jobs or benchmark jobs. Salary surveys are used to establish or price a salary structure, analyze pay-related problems, and/or adjust pay levels in response to competitive pay changes.

Sub-Family

A sub-set of a job family, usually more specialized in nature.

Sub-Family Examples:

  • Compensation, Benefits (sub-families within Human Resources)
  • Help Desk, Systems Analysis (sub-families within Information Technology)
  • Reference & Instruction, Library Support (sub-families within Library Services)

Total Compensation

The complete pay package for employees, including all forms of salary, bonuses, benefits and services.