Below is a comprehensive list of common compensation terminology, plus a few key terms specific to OpenComp’s technology to help you expertly navigate our content and offerings.
Below is a comprehensive list of common compensation terminology, plus a few key terms specific to OpenComp’s technology to help you expertly navigate our content and offerings.
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Adjustment: Adjustments are compensation or salary changes done outside of normal compensation activities like promotions and merit cycles to remedy salary issues such as high demand in specific job families, changes in geo-location, or retention considerations.
Baseline Scenario: The default snapshot of the user’s company showing a current or hypothetical future group of employees and their positions within market data.
Benchmark Role: A specific role in the OpenComp data set that employees are compared against in the market. It includes the same role across multiple levels. Each Benchmark Role is one of the four OpenComp Job Types and fits into one OpenComp Job Family.
Burn rate: Burn rate is the pace at which a company spends money, especially venture capital, in excess of revenue. Burn rate is typically calculated in terms of how much cash a company spends per month.
Compensation: Compensation is what an employer pays an employee to do a job. A compensation package for an employee includes base salary, variable salary (things like bonuses and sales commissions), and equity. It also includes benefits.
Compensation benchmarking: Compensation benchmarking is the process of comparing an organization’s compensation for a role to the compensation of similar roles at other companies in similar industries and within similar stages of financing.
Compensation philosophy: A compensation philosophy, or compensation strategy, is a universal statement about a company’s pay and reward strategy. It reflects an organization’s values, market positioning, finances, and goals. It’s the foundation for a company’s pay structure and overall compensation program.
Compensation plan: A company will create a compensation plan to inform how compensation is handled across employees in various roles and at various levels.
Compensation surveys: A compensation survey, or sometimes called a salary survey, is a process of gathering, summarizing, and analyzing data on the compensation paid by employers for select jobs. Surveys are typically conducted by independent third party organizations in three month increments. Due to the nature of the survey and analysis process, compensation data from surveys becomes outdated and stale every three months.
Comp Position: An employee or department or company’s position within the market data, measured as a percentile.
Compulator: OpenComp's compensation calculator that allows users of our platform to benchmark compensation for a given job or role. [DO WE STILL CALL IT THIS?]
Dilution: Dilution happens when a company issues or creates new shares that cause a decrease in existing shareholders' ownership percentage of a company. It also reduces a company's earnings per share, which can negatively impact share prices.
Diversity, Equity & Inclusion (DEI): Diversity, equity and inclusion (DEI) refers to the policies and programs that promote the fair representation and participation of various groups of people within the workplace. These groups can include individuals of different races and ethnicities, genders, sexual orientations, ages, abilities and disabilities, religions and cultures.
Employee stock pool: An employee stock pool refers to the total number of shares that are available for employee compensation. This is a subset of the Total Shares Outstanding, or the total number of shares that make up all of the value of a company.
Equity: Equity represents the monetary value that would be returned to shareholders if all company assets were liquidated and all debts were paid off. Think of equity as a degree of residual ownership in a company. The percent ownership for each employee is the employee’s shares as a fraction of the Total Shares Outstanding, the total number of shares that make up all of the value of a company.
Executive compensation: Executive compensation, also known as executive salary or executive pay, refers to pay packages specifically designed for senior management, business leaders, and executive-level employees of an organization.
Funding Group: The market data segment that a customer is compared against, defined by the amount of money raised. Also called Benchmark Funding Group.
Geographic pay differential: A geographic differential is a percentage applied to pay (either salary or equity) based on location. This is sometimes referred to a location-based pay or remote pay.
Geographic strategy: A company's approach to setting compensation for specific locations and defining how it will manage geographic pay differentials in a domestic or global market. When developing a geographic strategy (also known as a compensation strategy), organizations typically consider the cost of labor, location economic conditions, and competitive market trends. The goal is to maintain consistent, equitable, and competitive pay for employees.
Headcount plan: A headcount plan is the product of a crucial component of workforce planning. Headcount planning is a process in which organizations ensure they have the right people, with the right skillsets, to meet both short- and long-term business goals within a fixed labor budget.
HRIS: An HRIS, or human resources information system, is a software that provides a centralized location to maintain and manage detailed employee information and HR processes and policies. An interactive information management system, HRIS enables HR team members to be more efficient and facilitates accurate record keeping and reporting.
Incentive plan: Incentive plans are a type of compensation structure that uses rewards to motivate employees to achieve specific goals. These rewards go above and beyond the pay and benefits that employees normally receive for the hours they work.
Job Family: Usually related functional departments within an organization, a job family is group of jobs that are similar in the nature of work that they perform. In OpenComp's compensation intelligence platform a job family is a group of benchmark roles that follow one career progression.
Job level: Job levels set the responsibility level and expectations of roles at an organization. They may be defined by seniority, knowledge, skills, or job title, and are associated with a salary range.
Job Type: OpenComp includes a job type as a quality of each benchmark role. Every benchmark role has one of four job types associated with it: Support, Individual Contributor, Management, and Executive.
Market Analysis: A market analysis studies the compensation averages and medians in a given industry and/or size of company, often in a specific geography. A market analysis seeks to determine the range of pay within the selected demographic, as well as the median and average for different roles' and job families' pay.
Market Position: Market position refers to a company's standing inside an overall average or median percentile of a market analysis.
Merit cycle: Merit cycle, the process for determining salary adjustments based on performance, usually begins with employee performance reviews, which may lead to a compensation increase by way of a promotion, salary bump, additional equity grant, or a bonus.
Merit pool: The merit pool is the total funds available for providing merit increases. Merit increases happen in conjunction with a merit cycle.
Model Scenario: An alternative model of the user’s company. A rendition of a current or hypothetical future group of employees at the company and their positions within market data, which can differ from that of the baseline scenario.
Offer letter: An offer letter is a written agreement that provides key terms of employment, most notably, compensation. It is created by a company and given to a prospective employee in the final stage of the hiring process, in anticipation of establishing a working relationship.
OTE: OTE is the acronym for “On-Target Earnings” which is the total cash compensation for employees paid by commission. It is the sum of base salary and commission.
Pay mix: Pay mix is the proportion of base salary and variable pay, such as commissions and bonuses, that make up someone's total compensation package. Pay mix is generally displayed as "80/20," where 80% refers to the portion of an employee's pay that is base salary, and 20% refers to the portion of pay that is variable.
Pay equity: When workers with similar experience are paid the same amount for doing similar work. Pay equity is often connected to equal pay practices and discussed with the gender pay gap.
Pay ranges: Pay ranges, sometimes referred to as salary ranges or salary bands, are the acceptable spread of values for compensation for employees of a given role and level. Each range is defined by a midpoint (calculated based on market data), a minimum, and a maximum. Ranges are unique to a company based on their compensation philosophy. Pay range development is notoriously tedious when handled in spreadsheets or by other manual methods. Many people team leaders find the use of a pay range app helpful in cutting down days or weeks of work to create and maintain their company's pay ranges.
Range Position: The range position, sometimes referred to as "range penetration" is the percentage of the way through a pay range that an employee is compensated at. The salary range includes the minimum, midpoint, and maximum rates an employer is willing to pay for a job. An employee at the midpoint of their range has a range position of 50%. Here is a key for considering where an employee might fall on the salary range:
Salary: A salary is a fixed payment made by an employer to an employee. Salaries are often expressed as an annual sum, but typically paid on a monthly or biweekly basis.
Segmentation: The set of factors that compares organizations of similar characteristics, with the goal of comparing how competitively one company pays in a similar talent market. Examples of selected segmentation characteristics include industry, geography, revenue, headcount, and total funds raised. Third-party compensation data providers traditionally allow clients to select these factors in their receive data set.
Salary bands: Salary bands, or pay bands, refer to the visual representation of a set of ranges as horizontal bars or “bands”. Sometimes the term “salary bands” is used interchangeably with salary or pay ranges.
Target Market Position: A target market position refers to a company's desired percentile within a market analysis.
Total compensation: Total compensation refers to the aggregate of all pay and benefits an employee receives. This may include base salary, equity, bonus, commission, benefits, overtime pay, or any other cash or non-cash form of compensation.
Total Shares Outstanding: Total Shares Outstanding refers to the total number of shares that make up all of the value of a company. The percent ownership for each employee is the employee’s shares as a fraction of this total value
