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Last updated: 23 March 2009
As with any professional body of knowledge, there are many words and phrases used in HR and reward, and this glossary explains some of the most common.
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Across-the-Board Increase
A uniform pay increase given to every employee i.e. a general increase.
Achievement Opportunities
One of the elements of the Quality of Work factor in the Engaged Performance model. The degree to which achievement and performance are expected and encouraged by the organisation.
Appropriate Freedom and Autonomy
One of the elements of the Quality of Work factor in the Engaged Performance model. The degree to which people are empowered and encouraged to take independent decisions and actions.
Base Salary
Annualised cash payment of Basic Salary plus all contractually agreed bonuses and payments, including:
• regional allowance
• guaranteed shift payments
• job premia and market supplements
It does not include:
• variable shift payments
• overtime payments
• unsocial hours payments.
Base less Regional Allowance (BLRA)
Base salary as defined above excluding regional allowance where regional allowance is paid as an explicit amount separate from Basic Salary.
Basic Salary
The basic annualised contractual cash amount paid for work performed, including consolidated performance related payments. Does not include Regional Allowances, Fixed Bonuses and any other cash payments.
Benefits Categories
Employee benefits are commonly divided into the following three categories:
• Statutory (legally required) benefits
• Insurable (non-statutory) benefits
• Benefits in kind and perquisites
For example, the following categories explain further the types of benefits to be included in each area:
Statutory Benefits: State pension contributions, social security contributions
Insurable Benefits: company provided pension, life assurance,
Benefits in Kind: holidays, cars and car allowances, club memberships, meal facilities, telephone contributions, other perquisites
These are not exhaustive lists of all possible benefit types and are only representative of the benefits in each category.
Bonus (see Fixed Bonus, Variable Bonus, Total Bonus)
Additional lump-sum cash payment made on top of a basic salary for either individuals or groups.
Bonus Paying Organisation
A 'bonus paying' organisation is define as a organisation where the potential exists for at least some group of job-holders to receive a performance related cash award or other variable bonus excluding sales commission. Profit Share and PRP are also included in Total Cash figures. Where figures have been submitted the organisation is regarded as a Bonus Paying Organisation.
If Total Cash can potentially be different to Base Salary for any reason other than the payment of sales commission, then it is classified as a bonus paying organisation.
Call-Out Pay
A guarantee of pay for a minimum amount of time when employees are called back to their work outside of their normal work hours.
Career Advancement Opportunities
One of the elements of the Future Growth/Opportunity factor in the Engaged Performance model. The degree to which opportunities exist and individuals are encouraged to develop or advance their careers.
Cars and Car Allowances
Car benefits are the provision of cars to employees, available to the employee for private as well as business use. This provision can be in the form of a provided car or an allowance.
Challenge/Interest
One of the elements of the Quality of Work factor in the Engaged Performance model. The degree to which the organisation provides challenging and interesting opportunities for individuals.
Commuting
The commuting benefit is a reimbursement for the cost incurred by travelling between home and work.
Compa-Ratio
This measures average actual salaries in relation to mid-point salaries. This is a useful salary administration tool, and can be used for all jobs in an organisation or on an individual grade basis.
Formula is:
Compa-ratio = Sum of all Actual Base Salaries x 100
Sum of all mid-point Base Salaries
Competitive Pay and Progression
One of the elements of the Tangible Rewards factor in the Engaged Performance model. The degree to which the cash (base salary and variable pay) paid by the organisation reflects pay available elsewhere.
Correlation
A statistical index used to measure the association between two variables. The correlation coefficient of 1:1 indicates a perfect positive relationship. Benchmark jobs are correlated to ensure proper comparability between data. If the relationship between the two is not 1:1 a correlation factor is applied to adjust evaluations for comparison purposes.
Cost-of-Living Increase
An across-the-board salary increase or supplemental payment designed to bring pay in line with increases in the cost of living. For Hay survey purposes treated as a General Increase.
Death in Service - Lump Sum
A lump sum benefit paid upon the death of an actively employed person. It does not include benefits only payable if the death is caused by an accident or benefits only payable as an annuity.
Death in Service - Survivor's Pension
An pension awarded to the survivor upon the death of an actively employed person. It does not include lump sum benefits.
Deferred Benefits
When an employee leaves service prior to the normal retirement age and years of service under a defined benefit plan, his/her deferred benefits are calculated using various methods:
• Uniform accrual/proportional deferred benefits: Using the benefit formula, the amount calculated to be the annual annuity based on the salary base at termination but the total years of service that the member would have had had he/she stayed to retirement. This final number multiplied by a factor which is the ratio of the number of years of actual service of the employee to the total years of service that the member would have had had he/she stayed to retirement.
• Accrued vested deferred benefits: Using the benefit formula, the amount calculated to be the annual annuity based on the past years of service in the plan and the salary base at termination.
• Time proportional deferred benefits: Using the accrual formula, the annual annuity is calculated based on the salary base at termination but the total years of service that the member would have had had he/she stayed to retirement. The same salary base, accrual formula, and date of retirement are used to calculate the annual annuity of a new entrant entering today and terminating at this date. The time proportional accrued value is the difference between these two items.
Dialogue, Consultation and Communication
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The extent to which the organisation establishes and manages effective internal communication mechanisms, channels and processes.
Disability Plans
Normally refers to short and long term disability plans that are not early payment of benefits from retirement plans. Disability income is the provision of income during longer time periods than sick pay plans or for permanent absence due to ill health or invalidity.
Education Assistance
Employer contributions to education expenses for employees (other than job-related training) and/or children of employees.
Eligibilities
The employee's eligibility to receive a benefit because of his/her job, e.g. Pension Scheme membership, status car, medical insurance, overtime. The employee does not have to be in receipt of the benefit, merely eligible.
Employee Assistance Programmes
Support provided to employees to enable them to deal with personal issues that might adversely affect their health, well-being and work performance.
Engaged Performance
The Hay Group Total Reward model specifically adapted for the public service in this toolkit to reflect public service engagement factors.
Environmental Reward
Those elements of the Total Reward package that are intangible, satisfying the individual’s needs such as personal development or work/life balance.
Expatriate
An employee who is assigned to work outside his or her base country for any period of time and for whom additional cash and benefit compensation is made to maintain remuneration equitability with their base country.
Fairness of Reward
One of the elements of the Tangible Rewards factor in the Engaged Performance model. The degree to which the reward package provided by the organisation can be regarded as internally fair and equitable by staff.
Fixed Bonus
A standard (fixed) amount paid to all or certain categories of staff which is guaranteed.
Flexible Work and Retirement Options
One of the elements of the Work/Life Balance factor in the Engaged Performance model. The degree to which the organisation allows and enables employees to choose the hours and days they work and they age at which they can retire.
Fully Acceptable Rate
The annual basic salary that would be paid for fully acceptable performance in the job.
General Increase (see Cost-of-Living Increase)
Geographic Location
Either the location of the Head Office for the organisation or the location where an individual job holder is based, denoted by postal codes.
Good Benefits
One of the elements of the Tangible Rewards factor in the Engaged Performance model. The degree to which the benefits provided by the organisation reflect those available in the sector or relevant marketplace.
Housing
House or apartment owned or rented by the employer and available permanently or occasionally for private use (i.e. not including an apartment available only for business use in lieu of staying in an hotel).
Incentives for Higher Performance
One of the elements of the Tangible Rewards factor in the Engaged Performance model. The degree to which the organisation offers additional payments (higher base salary, higher salary increase and/or bonus or incentive payments) for employees who perform well.
Incremental Increase
Standardised increase within a structured grading system which is dependent on time served, not necessarily performance related, range or index linked.
Job Family
A grouping of roles that undertake similar types of work, and require similar types of skill, training or qualifications (though these may be at varied levels of complexity). Examples of job families in the public sector are: Customer Service, Professional, Technical.
Job Matching / Mapping
Matching roles against a reference role profile or level as part of the salary market review process.
Learning and Development beyond Current Role
One of the elements of the Future Growth/Opportunity factor in the Engaged Performance model. The degree to which the organisation encourages and provides active support/facilities for personal development and learning.
Long Term Incentives
Long term incentives are incentives earned over a period of more than one year. They include share plans (share options, restricted share plans, share appreciation rights, and matched purchase of shares) and cash plans (multi-year goals, deferred awards, phantom plans, performance units or shares). These are commonly part of senior private sector reward packages, but rarely used in the public sector.
Lunch Provisions
Lunch provisions include employee restaurants or dining facilities paid or subsidised by the employer, including vouchers, cash lunch allowances or restaurant accounts available on a regular basis. They do not include facilities or allowances only available when entertaining business contacts or travelling on business.
Market Premia
An annual cash addition to base pay for the grade, implemented to reflect higher pay levels achieved in the market as a result of a scarcity of specific skills – this is only paid along as the scarcity exists.
Mean
An arithmetic average obtained by adding a series of numbers and then dividing the sum by the number of items in the series.
Median
The middle item in a series of numbers which have been ranked from high to low. Where there is an even number of items the average of the two middle items is taken as the median.
Merit Increases
Salary increase based on individual performance.
Midpoint
The midway point of a range, e.g. the salary midway between the minimum and maximum rates of a salary range.
Mode
The figure that occurs most frequently in a series of numbers. For salary survey purposes this may be referred to as the most typical salary.
“On-Target” Variable Bonuses
The “on-target” total of all short term variable bonuses and incentives expected in the current year, expressed as a percentage of current Base Salary, e.g. 3.25.
Other Base
Guaranteed contractual payments such as market premia, directors’ fees and contractual shift payments.
Other Cash
Cash payments such as over-time payments, non-contractual shift payments and weekend working. For Hay survey purposes is included in Total Earnings but not in Total Cash.
Parking
Free parking provided by the employer for the employee.
Pay Grade
The defined grades within a graded salary structure.
Pay Group
The different groups of jobs (or employees) within an organisation which have a common salary policy that are distinguished by status, type of work, pay scheme, conditions of service, trade union arrangement, or similar characteristics.
Percentile
A measure of the location in a distribution of numbers that defines the value below which a given percentage of the data falls. For example, the 90th percentile is that value below which 90% of the data falls.
Perception of the Value of Work
One of the elements of the Quality of Work factor in the Engaged Performance model. The value or impact of the work of the job in contributing to the success of the organisation.
Physical Environment
One of the elements of the Enabling Environment factor in the Engaged Performance model. The effort which the organisation puts into providing and improving the physical working environment.
Policy Line
Typically the mid-point of the salary ranges in a pay structure. In salary structures based on grades of only a few progression points, the "policy" level may be the maximum of the grade, or the "fully acceptable" rate.
Practice Lines
A regression line calculated through the jobs - sometimes called a line of 'best fit'. The intention is to represent an organisation's pay practice as accurately as possible.
Premium Pay (also called Market Premia)
Extra cash payment beyond the guaranteed Basic Salary for a job to maintain its competitiveness, e.g. additional 5% added to Basic Salary for Actuarial staff.
Profit Share
Payments made under approved profit sharing schemes. For Hay survey purposes the cash equivalent if shares received.
Promotion of Diversity
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The degree to which the organisation promotes and develops a diverse workforce, with equality of opportunity for all employees and members of the community.
Public Service Values
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The extent to which the organisation both defines and demonstrates a coherent set of values.
Quality of Leadership
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The extent to which the leaders in the organisation provide effective and motivating leadership
Quality of Work Relationships
The degree to which the work environment provides interesting, stimulating and beneficial One of the elements of the Quality of Work factor in the Engaged Performance model. working relationships.
Quartile
The percentile which breaks a set of numbers into 4 equal parts, i.e. the third quartile is the 75th percentile, the second quartile is the median or 50th percentile and the first quartile is the 25th percentile.
Recognition Awards
One of the elements of the Tangible Rewards factor in the Engaged Performance model. The extent to which the organisation provides specific awards which recognise specific achievements and contributions.
Recognition for Achievements
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The degree to which the organisation recognises individuals’ achievement and contribution.
Recognition of Lifestyle Needs
One of the elements of the Work/Life Balance factor in the Engaged Performance model. The degree to which employees can achieve a balance between work demands and their life outside work.
Reference Level
In organisations using the Hay Guide Chart and Profile method of Job Evaluation, this is the Job Unit range within which jobs of a similar size fall and between which just noticeable differences in job size are evident.
Regional Allowance
Annual payment made to the job holder for working in a particular part of a country.
Regression (see Practice Lines)
A statistical technique which when used in salary management shows the relationship between two variables i.e. Job Size and Salary - represented as a straight line.
Regular Feedback on Performance
One of the elements of the Future Gworth/Opportunity factor in the Engaged Performance model. The degree to which the organisation works with individuals to clarify performance requirements, improve performance, and provide effective feedback.
Remuneration
Refers to the cash elements plus benefits of a reward package.
Representation Allowance
A representation allowance is an allowance for entertaining business-related people outside the office other than strict reimbursement of the cost of these expenses.
Reputation of the Organisation
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The degree of regard in which the organisation is held by the external community
Retirement Pension
A retirement benefit is continued income and/or capital sum payable to an employee ceasing employment after reaching a certain age and/or completion of a specified period of service.
• Defined benefit plans are those retirement schemes where the benefit at retirement is clearly defined as a formula (typically a % of salary close to retirement related to years of service) and the contribution needed to support this benefit is a calculated result.
• Defined contribution plans (savings plans) are retirement schemes where the contribution is specified and the benefit at retirement is whatever is provided by the accumulated result of these contributions.
Retirement pensions include plans whether tax qualified or not, termination indemnities in excess of statutory (social security or other legal) requirements, additional employer contributions to statutory/institutional plans above obligatory payments, savings plans which include an employer contribution, deferred profit sharing plans and supplementary executive retirement plans (top hat).
Risk Sharing
One of the elements of the Inspiration/Values factor in the Engaged Performance model. The degree to which the organisation encourages employees to take risks and the degree to which it takes collective responsibility for the consequences of risk taking by employees.
Safety/Personal Security
One of the elements of the Enabling Environment factor in the Engaged Performance model. The degree to which the employee is exposed to personal risks either in the workplace or during travel and other activities associated with work.
Salary Sacrifice
An amount of pre-tax salary that the employee decides to contribute to an enhanced benefit – such as a pension plan or childcare vouchers.
Sales Commission
Financial incentive for sales staff usually in the form of an amount calculated as a percentage of the sale.
Same Incumbent Movement
This analysis shows salary movements within a sample of jobs. It is based on only those incumbents in the same job at the two dates being compared.
Same Organisations Comparison
This is a method of showing salary movements within a survey sample. The analysis only includes those organisations which have participated in the relevant survey in the past and excludes organisations which have undergone a re-organisation or have submitted a different sample of jobs. Generally this is the most representative analysis of salary movements over a certain period.
Scattergram
Graphical representation of jobs, where the jobs are plotted according to job size and salary. Shows the distribution of salaries at a given point in time.
Sector
The market in which the organisation operates. e.g. Local Government, Health, Central Government, Financial Services, Oil & Gas etc.
Security of Income
One of the elements of the Work/Life Balance factor in the Engaged Performance model. The degree of security of employment and income provided to the employee.
Severance Payments
Severance payment cash amounts paid over and above any statutory benefit when an employee leaves on a compulsory basis.
Share Options
Plans in which a private sector employee can acquire the right to buy company shares at some specific future point or period in time at a price fixed now which may be equal to, above or below the market price of the shares at the time of grant of option.
Sick Pay
Sick pay is the continued payment of full or partial earnings to an employee absent due to ill health. It usually applies for a limited period or where there is a clear expectation of returning to work.
Social Environment
One of the elements of the Work/Life Balance factor in the Engaged Performance model. The degree to which positive social interaction between employees exists and is fostered, within and outside the workplace
Sound IT/Work Processes
One of the elements of the Enabling Environment factor in the Engaged Performance model. The effort which the organisation puts into providing processes and access to information to facilitate effective working.
Staff Turnover Definition
The definition for average employee turnover (excluding retirements and redundancies) is:
Number of Employees Leaving
Average Number of Employees in Post During Year
Supportive Environment
One of the elements of the Work/Life Balance factor in the Engaged Performance model. The degree to which the organisation provides an environment in which employees feel that they are considered and cared about as people..
Telephone Allowance
A payment by the employer of an allowance for the rental or calls on the employee's home telephone, other than strict reimbursement of the cost of business calls.
Tools and Equipment
One of the elements of the Enabling Environment factor in the Engaged Performance model. The effort which the organisation puts into providing appropriate and effective work facilities.
Total Bonus – see Total Variable Bonuses
Total Cash
Base salary plus all variable bonuses, sales commission, profit share and incentive payments related to some measure of (company or individual) performance.
Total cash does not include:
• overtime payments
• variable shift payments
• unsocial hours payments
Total Direct Compensation
The amount of cash received by a job holder plus the estimated value of that job holder's long term incentive grant, discounted to a current value. Typically used for comparisons of private sector executive roles.
Total Earnings
Total earnings comprise Total Cash compensation plus other payments such as overtime payments, shift premia, unsocial hours payments and other job-holder awards. It represents the total of all possible cash awards to each individual job holder.
Total Employment Cost
Represents the total cost to the employer of an individual's remuneration package and includes the cost of the following:
• Total Cash
• Statutory Benefits
• Insurable (non-statutory) Benefits
• Benefits in Kind
Hence Total Employment cost is just Total Remuneration Cost plus the cost to the employer of statutory social benefits.
Total Remuneration Cost
This is defined as the cost to the employer of the following:
• Total Cash
• Insurable (non-statutory) Benefits
• Benefits in Kind
Total Remuneration Value
This represents the value to the employee of the following:
• Total Cash
• Insurable Benefits
• Benefits in Kind
Therefore Total Remuneration Value attempts to value, for the employee, the same elements as are costed for the employer in the previous definition of Total Remuneration Cost.
Total Reward
The entirety of the organisation’s reward policy, incorporating all the elements of Total Remuneration Value, and the non-financial benefits of working for the organisation. (i.e. all elements in the Engaged Performance Model.)
Total Variable Bonuses
The annual total of all short term variable bonuses and incentives, e.g. All Organisation Bonus Scheme, Profit Related Pay, Profit Share or Incentive Payments paid in the last year.
Training for Current role
One of the elements of the Enabling Environment factor in the Engaged Performance model. The degree to which the organisation provides training and development support/facilities to enable the employee to deliver their current job.
Typical Salary (see Mode )
Variable Bonus
The payment made to an individual or group of individuals which is based on individual or organisational performance (not performance related pay which is consolidated in Basic Salary).
Vesting
Vesting is the term used to describe irrevocable employee ownership of the benefits derived from the contributions made by the employer.
Working Time
All plans and schedules which will influence the total contractual working hours on an annual basis including: weekly, monthly or annual working hours; annual holiday (vacation) entitlement; statutory/public holidays; and factory closure.
Workload
One of the elements of the Quality of Work factor in the Engaged Performance model. The workload which generally exists and is expected within the organisation.