| Term |
Definition |
| benefits |
Programs that an employer uses to supplement the cash compensation an employee receives. Benefits include income protection programs such as publicly mandated and voluntary private "income protection" programs that often are provided through insurance, pay for time not worked and other employee perquisites. |
| compensable factors |
Any characteristic used to provide a basis for comparing job content in a job-evaluation scheme. The most commonly used factors include responsibility, skill required, effort and working conditions. |
| compensation |
Cash provided by an employer to an employee for services rendered. Compensation comprises the elements of pay (e.g., base pay, variable pay, stock, etc.) that an employer offers an employee in return for his or her services. |
| compensation philosophy |
Ensures that a compensation program supports an organization's culture. |
| culture |
The holistic interrelationship of a group's identity, beliefs, values, activities, rules, customs, communication patterns and institutions. |
| deferred compensation |
Any of a number of compensation payments that are payable to an employee at some point in the future. These include voluntary deferral of earned incentives, mandatory deferrals of earned incentives as well as earnings and retirement plan vehicles. |
| defined benefit (DB) pension plan |
Defined by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC) as any retirement plan that provides for future income and is not an individual account plan. It is a pension plan that specifies the benefits, or the methods of determining the benefits, but not the level or rate of contribution. Contributions are determined actuarially on the basis of the benefits expected to become payable. |
| defined contribution (DC) pension plan |
Defined by the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC) as a plan that provides for future income from an individual account for each participant with benefits based solely on 1) the amount contributed to the participant's account plus 2) any income, expenses, gains and losses, and forfeitures of accounts of other participants that may be allocated to the participant's account. The benefit amount to be received by the participant at retirement is unknown until retirement. |
| dependent care spending account |
An arrangement whereby out-of-pocket expenses for care of dependent children or other wholly dependent individuals can be reimbursed through a pretax flexible spending account. Section 129 of the Internal Revenue Code (IRC) permits tax-free dependent care of up to a specified amount per year. This is in lieu of the dependent care tax credit, which may be better for some individuals. Also known as dependent care subsidy. |
| Fair Labor Standards Act of 1938 (FLSA) |
A federal law governing minimum wage, overtime pay, child labor and record-keeping requirements. |
| Family and Medical Leave Act of 1993 (FMLA) |
A federal law entitling eligible employees to take up to 12 weeks of unpaid, job-protected leave in a 12-month period for specified family and medical reasons. Specified family and medical reasons include: the birth and care of a newborn child of the employee; placement with the employee of a son or daughter for adoption or foster care; care of an immediate family member (spouse, child, or parent) with a serious health condition; or medical leave when the employee is unable to work due to a serious health condition. The FMLA is administered by the U.S. Department of Labor's Employment Standards Administration, Wage and Hour Division. |
| Health Insurance Portability and Accountability Act of 1996 (HIPAA) |
A federal law, enforced by the Department of Labor (DOL), designed to protect individuals who move from one job to another, who have pre-existing medical conditions or who are self-employed, by imposing a number of requirements on employer-sponsored health care plans. These requirements range from limiting pre-existing condition exclusions to mandating that employers provide certificates of prior plan coverage. Acts and provisions under HIPAA include: Newborns' and Mothers' Health Protection Act of 1996, Mental Health Parity Act of 1996, Women's Health and Cancer Rights Act of 1998, Administrative Simplification Provisions (Privacy Rules) - 2001 and Nondiscrimination |
| incentive compensation |
Variable rewards for performance or achievement of short-term or long-term goals. Designed to stimulate employee performance. |
| long-term incentive plan |
Any incentive plan (usually limited to executives) that requires sustained performance of the firm for a period longer than one fiscal year for maximum benefit to the employee. Some plans are based on capital shares of the organization and may require investment by the employee, while others are based on financial performance. |
| pension |
A fixed sum of money paid to an employee who has retired from a company and is eligible under a pension plan to receive such benefits. May be funded (paid from a trust) or unfunded (paid from the company assets). |
| pension plan |
A plan that provides income benefits, after retirement, from a trust or other separately maintained fund, by the purchase of insurance, or from general assets (unfunded plan). |
| pension trust fund |
A fund consisting of money contributed by the employer and (in some cases) the employee, to provide pension benefits. Contributions are paid to a trustee who invests the money, collects the interest and earnings, and disperses the benefits under the terms of the plan and trust agreement |
| performance management |
A systematic approach for managing individuals and/or groups that involves planning, monitoring, appraising, rewarding and improving performance in support of the business strategy. |
| recognition program |
A policy of acknowledging employee contributions after the fact, possibly without predetermined goals or performance levels that the employee is expected to achieve. Examples include giving employees clocks or other gifts on milestone anniversaries, granting an extra personal day for perfect attendance or paying a one-time cash bonus for making a cost-saving suggestion. |
| remuneration |
The sum of the financial and nonfinancial value to the employee of all the elements in the employment package (i.e., salary, incentives, benefits, perquisites, job satisfaction, organizational affiliation, status, etc.) and any other intrinsic or extrinsic rewards of the employment exchange that the employee values. |
| salary budget |
A financial plan for the allocation of money to pay for wages and indirect compensation for a covered group of employees over a specified period. |
| salary budget survey |
A benchmark used by employers and HR practitioners to establish pay scales. |
| salary survey |
Compares salary data for specific postions by title and location. |
| stock option |
A right to purchase company shares at a specified price during a specified period of time. This is sometimes referred to as share options in countries outside the U.S. |
| telecommute |
The process of allowing employees to work from home from one day a week to working at home full-time. Technology connects an employee to office and/or business. |
| telework |
The process of allowing employees to work from an independent location anywhere from one day a week to working at home full-time. Technology connects an employee to office and/or business. |
| total rewards |
All of the tools available to the employer that may be used to attract, motivate and retain employees. Total rewards include everything the employee perceives to be of value resulting from the employment relationship. |
| variable pay |
Compensation that is contingent on discretion, performance or results achieved. It may be referred to as pay at risk. |
| work experience |
Elements of rewards that are important to employees but may be less tangible than compensation or benefits. It includes acknowledgement or recognition of effort/ performance, balance of work-life issues, cultural issues, development opportunities and environmental factors. |
| work-life effectiveness |
A specific set of organizational practices, policies, programs and a philosophy that recommends aggressive support for the efforts of everyone who works to achieve success both at work and at home. |
| workplace flexibility |
A variety of flexible work options that enable greater customization over when, where and how work gets done. The three most common full-time options are flex time, telecommuting and compressed workweek. The three most common part-time options include job sharing, phased return from leave and regular part-time work. |
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