Pay structure: The way in which an organization applies pay rates and financial rewards to different jobs, skills, or competencies

Reward system: The policies, procedures, and practices used by an organization to determine the amount and types of returns individuals, teams, and the organization receive in exchange for their membership and contributions

Relational returns: Nonmonetary incentives and rewards, such as new learning and developmental opportunities, enriched and challenging work, job security, and recognition

Total compensation: Package of compensation and benefits that employees receive

Compensation: Employee reward that includes base pay and variable pay and is sometimes referred to as direct pay

Benefits: Employee rewards that are sometimes referred to as indirect pay and include health, life, and disability insurance; retirement programs; and work–life balance programs

Internal equity: The fairness of pay rates across jobs within an organization

Point-factor method: A job evaluation approach in which a team of subject matter experts systematically identifies compensable factors and develops and applies scales and weights for compensable factors, ultimately resulting in points being assigned to different jobs to describe their relative worth

Compensable factors: The common dimensions by which jobs vary in terms of worth to the organization

Benchmark job: A key job that is common across different organizations in terms of its job description

External equity: The extent to which the pay for a particular job is competitive and fair relative to the pay of the same or similar jobs at other organizations

Individual equity: The fairness of how pay is administered and distributed to individual employees working similar jobs within the same organization

Traditional-pay programs: A payment program that is based on the content of employees’ job descriptions, job titles, and/or organizational levels

Pay-for-performance programs: Compensation programs that reward employees based on the behaviors they actually exhibit at work and the results or goals they actually achieve

Expectancy theory: A theory that suggests that if a person sees that their efforts will lead to greater performance, and if they believe that performance will lead to an outcome that they value, they will be more motivated

Pay compression Occurs when more recently hired employees with less experience earn nearly as much or the same as more experienced, longer-tenured employees in the same job or when employees in a lower-level job earn nearly as much or the same as employees in a higher-level job

Compa-ratio A ratio that reflects how much employees are actually paid for a given job or pay grade compared to the espoused pay structure and policies, and it can be used to assess whether systematic compression or inversion is occurring

Federal Insurance Contributions Act (FICA): A federal payroll tax paid by both employees and employers that funds current Social Security beneficiaries

Workers’ compensation: Program funded entirely by the employer in the form of payroll taxes that provides medical coverage and income replacement for an individual who is injured or becomes ill on the job due to an accident or hazard

Family and Medical Leave Act (FMLA): Introduced in 1993 to protect employees’ job security when they need to take unpaid leave due to family or medical issues

Employee Retirement Income Security Act (ERISA): Introduced in 1974 to establish minimum standards for many private employers’ health care plans to protect employees

“Consolidated Omnibus Budget Reconciliation Act (COBRA): Introduced in 1985 to protect employees’ and their beneficiaries’ health care coverage for a designated amount of time in the event of job loss, work-hour reductions, or another major occurrence

Health Insurance Portability and Accountability Act (HIPAA): Introduced in 1996 to add protections to the portability of employees’ health care coverage and ensure the privacy and security of employees’ health care data

Patient Protection and Affordable Care Act (ACA): Introduced in 2010 to provide rights and protections associated with access to health care coverage

Short-term disability insurance: A form of income protection for employees who temporarily become unable to work as a result of illness or injury

Long-term disability insurance: A form of income protection for employees that is similar to short-term disability insurance, except it offers longer-term benefits activated once short-term disability insurance benefits expire

Defined-benefit plan: Also known as a traditional pension plan, a type of retirement plan in which the employer provides plan participants with a pre established benefit to be paid out over a fixed time period

Defined-contribution plan: A type of retirement plan in which the employee and/or employer contributes to an investment fund

Life insurance program Provides financial compensation for designated beneficiaries when the insured individual dies

Paid time off (PTO): A program that provides employees with compensation when they take time away from work, subject to employer approval

Educational-assistance program: A program whereby the employer provides financial assistance for employee educational expenses