Pequity's Compensation Glossary

Welcome to Pequity's Compensation Glossary– your new go-to resource for all things, terms, and phrases related to compensation.

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360 Cycle

A 360 cycle is a feedback process that involves obtaining input on an employee's performance from multiple sources, including superiors, subordinates, peers, and sometimes external parties, to provide a comprehensive evaluation for performance appraisals and development purposes.


Algorithmic pay

Algorithmic pay involves the use of algorithms or automated systems to determine or influence compensation decisions, often involving data-driven analysis and calculations to ensure consistency and objectivity.

ATS (Applicant Tracking System)

An applicant tracking system (ATS) is a software application or system used by recruiters and HR professionals to manage the recruitment and hiring process, including job postings, candidate tracking, resume screening, and interview scheduling.

At-Risk Compensation

At-risk compensation components are subject to a certain level of risk and performance conditions, such as bonuses, commissions, or equity-based rewards, dependent on achieving specific targets or goals.


Benchmark Job

A benchmark job is a job role or position that serves as a reference point for determining salary ranges, pay structures, and compensation levels within an organization, often based on market data and industry standards.

Blended Job

A blended job is a role or position that combines responsibilities and requirements from multiple job functions or job families, often requiring a diverse skill set.


A bonus is an additional payment or reward given to employees beyond their regular salary, often provided as an incentive for achieving specific goals or outstanding performance.

Broad Base Compensation

Broad base compensation is a compensation strategy that focuses on providing competitive and equitable compensation across various job levels and employee groups within an organization, ensuring a fair distribution of rewards.


Cash Compensation

Cash compensation is the monetary portion of an employee's total compensation package, including base salary, bonuses, commissions, and other cash incentives.


A clawback is the process of recovering or reclaiming previously paid compensation or benefits from an employee, often due to contractual obligations, policy violations, or financial misconduct.


Commission is a form of variable compensation based on a percentage or fixed amount of sales or revenue generated by an individual or team, commonly used in sales-driven roles.


Compa-ratio is a measure used to compare an employee's current salary to the midpoint or target salary within their assigned pay range, expressed as a ratio or percentage. It helps assess how an employee's pay aligns with internal salary structures.

Compensation Cycle

A compensation cycle is the recurring timeframe, often annual, in which compensation-related activities such as salary reviews, bonus calculations, and other compensation adjustments take place.

Compensation Market Data

Compensation market data includes information and benchmarks gathered from external sources, surveys, or industry reports to assess and compare compensation practices and levels within the job market.

Compensation Philosophy

Compensation philosophy is a statement or guiding principle that outlines an organization's approach, beliefs, and strategies regarding compensation practices, including factors such as internal equity, market competitiveness, and performance-based rewards.

Compensation Plan

A compensation plan is a structured and comprehensive framework or strategy that outlines the various components, policies, and guidelines related to an organization's compensation practices, including base pay, incentives, benefits, and other rewards.

Compensation Software

Compensation software is a category of software applications or platforms designed to facilitate and automate various aspects of compensation management, including salary planning, incentive calculations, performance tracking, and reporting.

Compensation Split

Compensation split is the breakdown or allocation of an employee's total compensation among various components, such as base salary, bonuses, equity, and benefits.

Competency System

A competency system is a framework or approach used to assess, define, and measure the knowledge, skills, abilities, and behaviors required for successful performance in specific job roles within an organization.

Cost Center

A cost center is a specific department, unit, or division within an organization that is responsible for incurring costs and expenses, often used for budgeting, accounting, and cost allocation purposes.

Cost of Labor

Cost of labor refers to the expenses associated with employing workers, including wages, benefits, taxes, and other direct and indirect costs related to labor.

Cost of Living

Cost of living refers to the general level of prices for goods and services within a particular geographic area, used as a factor in determining compensation adjustments to account for regional variations in the cost of living.


DEI (Diversity, Equity, and Inclusion)

Diversity, Equity, and Inclusion (DEI) is an organizational initiative or strategy focused on promoting diversity, equity, and inclusion in the workplace, including efforts to eliminate bias, ensure fairness in compensation practices, and foster an inclusive work environment.


A demotion is the movement of an employee to a lower job position or level within the organizational hierarchy, often due to performance or organizational restructuring.

Discretionary Budget

Discretionary budget is a flexible or variable budget allocated for discretionary spending, including bonuses, incentives, or other forms of variable pay that are determined at the discretion of management.

Discretionary Pay

Discretionary pay is compensation that is not guaranteed or contractually obligated but is determined at the discretion of management, often based on subjective factors such as individual performance or contributions.



Equity is ownership in a company, typically in the form of stocks or shares, which may be granted to employees as part of their compensation package.

Equity Cliff

An equity cliff is a specific milestone or point in time within an equity vesting schedule at which a significant portion of an employee's equity grants or stock options become eligible for vesting.

Equity Grant

An equity grant is the issuance or allocation of company stock or equity-based awards to employees as part of their compensation package, typically subject to vesting and other conditions.

Equity Refresh

An equity refresh is the granting of additional equity or stock-based compensation to employees who already hold existing equity awards, typically intended to provide ongoing incentives, retain talent, or align compensation with performance.

Equity Vesting Schedule

An equity vesting schedule is a predetermined timeline or schedule that outlines when and how an employee's equity grants or stock options become eligible to be exercised or converted into actual shares.

ESOP (Employee Stock Option Pool)

An employee stock option pool (ESOP) is a pool or reserve of company shares set aside for granting to employees as part of their compensation package, often used to align employee interests with company performance and provide a sense of ownership.

Executive Compensation

Executive compensation refers to the specific compensation packages and arrangements provided to executives and senior leaders within an organization, often involving a combination of salary, bonuses, stock options, and other perks.


Exempt status refers to employees who are exempt from certain provisions of labor laws, such as overtime pay requirements, typically because they meet specific criteria related to job duties, salary level, and exemption categories defined by law.

External Equity Adjustment

An external equity adjustment is a compensation adjustment made to ensure that an employee's pay remains competitive with external market rates and industry standards, typically in response to changes in the labor market or talent demands.


Fixed Compensation

Fixed compensation is the portion of an employee's total compensation that remains constant and does not fluctuate based on performance or other factors, typically referring to the base salary or fixed components of pay.

FLSA (Fair Labor Standards Act)

Fair Labor Standards Act (FLSA) is a federal law in the United States that establishes minimum wage, overtime pay, record-keeping, and child labor standards for employees in both the private and public sectors.


Geo Differential

A geo differential is an adjustment or additional compensation provided to employees based on the cost of living or differences in labor market conditions across different geographic locations.

Geographic Strategy

Geographic strategy is a strategic approach or plan that considers geographic factors and variations in compensation practices, labor markets, cost of living, and talent availability when designing and implementing compensation programs.

Guaranteed Compensation

Guaranteed compensation is a fixed amount of compensation that an employee is assured to receive, often used when attracting or retaining key talent, and typically includes base salary and specific guaranteed bonuses or allowances.


Hazard Pay

Hazard pay is additional compensation provided to employees who work in potentially dangerous or hazardous conditions, as a way to recognize and compensate for the increased risks associated with their job.

HCM (Headcount Management System)

An HCM (headcount management system) is a system or software solution that helps organizations manage and track employee headcount, including aspects such as workforce planning, employee demographics, staffing levels, and personnel data.

Hourly Rate

An hourly rate is The amount of money paid to an employee for each hour of work, typically applicable to employees who are paid on an hourly basis rather than a salaried or fixed basis.

HRIS (Human Resource Information System)

An HRIS (human resource information system) is a software or technology platform used by HR professionals to manage and store employee data, automate HR processes, and facilitate reporting and analysis related to compensation, benefits, and other HR functions.

Hybrid Job

A hybrid job is a job that involves a combination of remote work and in-person work or a mix of different job roles, allowing for flexibility and a balance between remote and on-site work arrangements.


ISOs (Incentive Stock Options)

ISOs (incentive stock options) are stock options granted to employees that provide potential tax advantages if certain requirements are met, allowing employees to purchase company stock at a favorable price. ISOs are typically for US employees only.


Job Code

A job code is a unique identifier or alphanumeric code assigned to a specific job position, often used for tracking, reference, and organizational purposes.

Job Family

A job family is a group or category of related job positions or roles within an organization, often characterized by similar skill requirements, career paths, and compensation structures.

Job Title

A job title is the name or designation given to a specific job position, often reflecting the nature of the work, level of responsibility, and job function.


KPIs (Key Performance Indicators)

KPIs (Key Performance Indicators) are measurable metrics or indicators used to assess individual or organizational performance, often tied to specific goals or objectives and used to evaluate performance for compensation purposes.


Labor Market

The labor market is the overall market or environment in which labor services are bought and sold, including the supply of available workers, the demand for specific skills, and prevailing wage rates.


Leveling is the process of assigning a specific job position to a particular job grade or level within an organization's job structure, typically based on factors such as job responsibilities, required skills, and organizational hierarchy.

Leveraged Compensation

Leveraged compensation are compensation arrangements that offer the potential for higher earnings or rewards based on achieving or exceeding predetermined performance targets, often through the inclusion of variable pay components.

Long Term Incentive

Long term incentives are compensation programs designed to motivate and reward employees for achieving long-term business objectives, often involving equity-based awards or deferred cash payments.


Market Analysis

Market analysis is the process of gathering and analyzing data and information about compensation and labor market trends, industry benchmarks, and competitor practices to inform decision-making and ensure competitiveness in compensation strategies.

Market Position

Market position is the relative standing or competitiveness of an organization's compensation and benefits offerings compared to other employers in the same industry or labor market, taking into account factors such as pay levels, benefits, and total rewards.

Market Refresh

A market refresh is a periodic review and adjustment of compensation levels to align with market conditions and ensure that employees' salaries remain competitive within the industry or job market.

Merit Award Letter

A merit award letter is a written communication provided to an employee to inform them of a merit-based salary increase or bonus, typically outlining the details of the award, the effective date, and any conditions or performance expectations associated with it.

Merit Cycle

A merit cycle (aka 'compensation cycle') is the period of time, usually annual, during which employees' performance and contributions are evaluated, and salary adjustments or increases are determined and implemented based on this performance or “merit.”

Merit Increase

A merit increase is a salary increase awarded to an employee based on their performance, contributions, and accomplishments during the merit cycle or evaluation period.

Merit Pool

A merit pool is a designated pool of funds or budget set aside by an organization to fund merit-based salary increases or bonuses for employees, typically distributed based on individual performance, contributions, or other predetermined factors.


A midpoint is the middle point or value within a salary range or pay band assigned to a particular job position, often used as a reference point for salary decisions and adjustments.

MRP (Market Reference Point)

An MRP (market reference point) is a specific compensation target or benchmark within the market, often used as a reference for setting salary ranges or evaluating the competitiveness of an employee's pay.



Non-exempt status refers to employees who are not exempt from provisions of labor laws, including requirements for overtime pay and other protections, typically because they do not meet the criteria for exemption.

NSOs (Non-Qualified Stock Options)

NSOs (non-qualified stock options) are stock options that do not meet the requirements for preferential tax treatment, typically granted to employees as part of their compensation packages. NSOs are typically for non-US employees.


Offer Letter

An offer letter is a formal written document provided to a job candidate who has been selected for employment, outlining the terms and conditions of the job offer, including compensation, benefits, start date, and other relevant details.


Options are a financial instruments that give the holder the right, but not the obligation, to buy or sell a specific number of shares of a company's stock at a predetermined price within a certain timeframe.

OTE (On Target Earnings)

OTE (on target earnings) are the expected or target level of total compensation for a salesperson or individual in a commission-based role, including both base salary and potential variable pay such as commissions or bonuses.

Overtime Pay

Overtime pay refers to additional compensation granted to employees for hours worked beyond the standard working hours, typically exceeding 40 hours per week, as mandated by labor laws or company policies.


Pay Bands

Pay bands are a range of salary levels associated with specific job positions or grades within an organization, providing a framework for determining appropriate compensation based on factors such as experience, skills, and responsibilities.

Pay Compression

Pay compression is a situation where there is a narrow salary difference or limited gap between the compensation levels of employees at different job levels or with varying levels of experience, often causing issues with internal equity and retention.

Pay Effective Date

The pay effective date is the date from which a new or revised compensation rate or salary becomes applicable to an employee, typically associated with salary increases, promotions, or changes in compensation structure.

Pay Equity

Pay equity is the principle of providing equal pay for equal work, ensuring that individuals performing the same job or similar tasks receive the same level of compensation, regardless of gender, race, or other protected characteristics.

Pay For Performance

Pay for performance is the principle or practice of linking an employee's compensation to their individual or team performance, often involving performance-based incentives, bonuses, or variable pay structures.

Pay Mix

A pay mix is the proportion or ratio of fixed (base salary) and variable (bonuses, commissions, etc.) components in an employee's compensation package, often expressed as a percentage.

Pay Parity

Pay parity is the principle of ensuring that individuals in similar roles or positions receive equal pay, regardless of factors such as gender, race, or other protected characteristics.

Pay Progression

Pay progression is the advancement or increase in an employee's compensation over time, typically associated with factors such as performance, tenure, promotion, or market adjustments.

Pay Range

A pay range is the minimum and maximum salary limits or boundaries for a particular job position, indicating the potential compensation range within which an employee's salary may fall.

Pay Transparency

Pay transparency is the practice of openly sharing information about compensation structures, salary ranges, and the factors influencing pay decisions within an organization, fostering transparency and fairness in compensation practices.


Pro-rate (aka 'proration') is the calculation or adjustment of compensation or benefits proportionally based on the duration or amount of time an employee has worked during a specific period, such as part-time employment or a partial pay period.

Promotion Increase

A promotion increase is a salary increase granted to an employee who is promoted to a higher job position or level within the organization.

PSUs (Performance Stock Units)

PSUs (performance stock units) are similar to RSUs (restricted stock units). Performance stock units are granted to employees but are contingent upon the achievement of predetermined performance goals or targets.



A quota is a predetermined target or goal set for individuals or teams, typically in sales or production roles, representing the expected level of performance or output to be achieved within a specific time frame. Quotas are often expressed in quantitative terms, such as sales revenue, units sold, or production volume, and are used to measure and evaluate performance, determine incentives or commissions, and drive desired outcomes.


Range Penetration

Range penetration is the position of an employee's current salary within the salary range or pay band assigned to their job position, often expressed as a percentage to indicate how much of the range the employee's salary occupies.

RSUs (Restricted Stock Units)

RSUs (restricted stock units) are units of company stock granted to employees that typically vest over a specific period, subject to certain conditions or performance milestones, and convert into actual shares upon vesting.


Salary / Base Salary

The salary (aka 'base salary' or 'base') is the fixed amount of money paid to an employee for performing their regular job duties, excluding any additional variable compensation.

Short Term Incentive

Short term incentives are compensation programs that provide bonuses or incentives based on shorter-term goals, typically spanning a fiscal year or performance period.

Spot Bonus

A spot bonus is an unscheduled, discretionary bonus awarded to an employee for exceptional performance, contribution, or achievement outside the regular compensation cycle.


A stipend is a predetermined fixed sum of money provided to individuals, typically for specific purposes like internships, fellowships, or academic research, often on a periodic or lump-sum basis.


Total Cash

Total cash refers to the combined amount of money an employee receives as compensation, including base salary, bonuses, commissions, and other cash incentives.

Total Compensation

Total compensation refers to the overall value of an employee's compensation package, including both cash and non-cash components such as salary, bonuses, equity, benefits, and perks.

Total Direct Compensation

Total direct compensation refers to the sum of an employee's base salary, bonuses, commissions, and other cash incentives, excluding non-cash benefits or perquisites.



A worker is underpaid when they receives compensation that is considered insufficient or below the market or industry standards for their role, experience, or contribution. It implies that the worker's pay does not adequately reflect their skills, responsibilities, or the value they bring to the organization. Being underpaid can lead to dissatisfaction, demotivation, and challenges with worker retention and engagement.


Variable Compensation

Variable compensation refers to compensation elements that fluctuate based on predetermined criteria or performance metrics, such as bonuses or commissions.



Wages typically refer to the monetary compensation or payment that an employer provides to an employee in exchange for their labor or services. Wages are often calculated on an hourly basis for employees who are paid based on the number of hours worked. Wages can also be expressed as a fixed rate per hour and may vary depending on factors such as the employee's job level, skills, or geographic location. Wages are typically associated with non-exempt employees who are entitled to overtime pay as per legal requirements.

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