Pay provided by an employer to an employee for services rendered (i.e., time, effort and skill).
Compensation is comprised of four core elements:
Fixed pay Also known as "base pay," fixed pay is nondiscretionary compensation that does not vary according to performance or results achieved. It usually is determined by the organization's pay philosophy and structure.
Variable pay
Also known as "pay at risk," variable pay changes directly with the level of performance or results achieved. It is a one-time payment that must be re-established and re-earned each performance period.
Short-term incentive pay
A form of variable pay, short-term incentive pay is designed to focus and reward performance over a period of one-year or less.
Long-term incentive pay A form of variable pay, long-term incentive pay is designed to focus and reward performance over a period longer than one year. Typical forms include stock options, restricted stock, performance shares, performance units and cash.
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