COMPENSATION AND BENEFITS

Compensation

this refers to the total monetary and non-monetary rewards given to employees in exchange for their work.

Base Pay / Basic Salary

this refers to the fixed amount of money paid to an employee for performing standard job duties, excluding benefits or bonuses.

Wages

this refers to compensation based on hourly, daily, or piece-rate work, typically for non-exempt employees.

Salary

this refers to a fixed regular payment, usually monthly or biweekly, regardless of hours worked, usually for exempt employees.

Pay Grade

this refers to a level or band of compensation assigned to jobs with similar value or responsibilities.

Pay Range

this refers to the minimum, midpoint, and maximum pay rate within a pay grade.

Variable Pay (Incentive Compensation)

this refers to the additional payments based on performance.

Incentives

this refers to financial rewards given based on achieving performance goals.

Bonus

this refers to a lump sum payment offered for outstanding performance or reaching company targets.

Commission

this refers to earnings based on a percentage of sales or business generated.

Profit Sharing

this refers to distributing a portion of company profits to employees, usually annually.

Gainsharing

this refers to bonuses based on productivity or cost-saving improvements within a team or department.

Merit Pay

this refers to a pay increase based on individual performance evaluation.

Performance-Based Pay

this refers to compensation tied directly to measurable individual, team, or organizational performance.

Benefits (Indirect Compensation)

this refers to non-wage rewards and services provided to employees as part of total compensation.

Fringe Benefits

this refers to extra benefits beyond salary like company cars, gym memberships, or housing allowances.

Perquisites (Perks)

this refers to special privileges for executives or senior staff, such as club memberships or private travel.

Health Insurance

this refers to coverage for medical, dental, vision, and wellness care, often provided by the employer.

Life Insurance

this refers to financial protection for employees’ beneficiaries in the event of death.

Disability Insurance

this refers to income replacement if an employee becomes unable to work due to injury or illness.

Retirement Plans

this refers to employer-sponsored savings plans for future retirement income (e.g., 401(k), pension plans).

Paid Time Off (PTO)

this refers to compensation for time not worked, including vacation leave, sick leave, and holidays.

Leave Benefits

this refers to time off for specific purposes like maternity/paternity leave, bereavement, or sabbatical.

Flexible Benefits / Cafeteria Plans

this refers to plans where employees choose from a menu of benefit options according to their needs.

Legal and Compliance Terms

these refer to laws and standards ensuring fairness and legality in compensation practices.

Minimum Wage

this refers to the lowest legal hourly pay an employer can offer.

Overtime Pay

this refers to higher pay, usually 1.5x, for hours worked beyond the standard workweek.

Equal Pay

this refers to the principle of paying employees equally for the same work, regardless of gender or other protected characteristics.

Pay Equity

this refers to ensuring fairness in compensation across roles and demographics.

Wage and Hour Laws

this refers to government regulations governing minimum wage, overtime, and working hours.

Strategic Compensation Terms

these refer to how compensation is aligned with business goals and strategies.

Total Rewards

this refers to the complete value proposition of compensation, benefits, work-life balance, development, and recognition.

Compensation Philosophy

this refers to a company’s formal approach to paying and rewarding employees.

Job Evaluation

this refers to a systematic process to determine the value or worth of a job in relation to others.

Market Pricing

this refers to setting pay levels based on competitive market data.

Internal Equity

this refers to fairness of pay within the organization.

External Equity

this refers to competitiveness of pay compared to the external labor market.

Benchmarking

this refers to comparing internal compensation practices to industry standards.

Executive Compensation

this refers to the special compensation packages for senior management.

Stock Options

this refers to the right to buy company shares at a fixed price in the future.

Equity Compensation

this refers to ownership-based incentives such as stock options or restricted shares.

Golden Parachute

this refers to large financial compensation given to executives if terminated due to mergers or acquisitions.

Deferred Compensation

this refers to earnings set aside to be paid at a future date, often for tax advantages.

Payroll

this refers to the process of calculating and distributing employee pay.

Withholding

this refers to deductions from pay for taxes or benefits.

Gross Pay

this refers to total earnings before deductions.

Net Pay

this refers to take-home pay after taxes and deductions.

Deductions

this refers to amounts subtracted from gross pay, such as taxes, benefits, or loan repayments.

Direct Compensation

Monetary payments directly made to employees like salary, wages, bonuses, and commissions.

Indirect Compensation

Non-monetary rewards and benefits provided to employees such as insurance, leave, and retirement.

Hazard Pay

Extra pay for working in high-risk or dangerous conditions.

Severance Pay

A one-time payment given to employees upon termination or layoff.

Pay Band

refers to broader salary range that encompasses multiple pay grades or job levels. It is used to group jobs that have similar value to the organization, providing more flexibility in setting employee salaries without being tied to strict job titles or grades.

Example:
A company has a Pay Band B that includes Junior Analyst, Analyst, and Senior Analyst roles.

• Pay Band B Range: ₱30,000 – ₱60,000

  • Junior Analyst might earn ₱32,000

  • Analyst might earn ₱45,000

  • Senior Analyst might earn ₱58,000

So, even though these are different job titles, they fall under one pay band and can move up within that range without needing reclassification into a new grade.

Skill-Based Pay

a compensation system where employees are paid based on their skills, competencies, or certifications rather than just their job title or position.