Allowances

Separate sums of money for such aspects of employment as overtime, shift working, call-outs, other special working conditions.  These are not considered as part of pay or salary but as a separate component (hence, the usage of the phrase ‘salary and allowances’).

Benefits

The full range of additional elements beyond pay that contribute to making up the total rewards for an employee.  Benefits could be cash/monetary or non-cash/non-monetary (for example, annual holidays) and have some actual or perceived value to the individual and cost to the employer.

Bonus - fixed

A fixed amount of bonus that is governed by the terms of the contract.  Usually fixed by reference to base salary eg one month’s bonus and paid every year at the same time. See contractual terms of employment. 

Bonus - performance

Cash lump sum payment based typically on an organisational as well as a team or an individual’s performance.

Bonus – variable

Bonus that can vary in amount from one year to the next either according to a predefined formulae (or according to management’s discretion). Typically based on organisational financial results determined after results are announced. In some organisations, these are distributed according to individual performance.

Compensation

Essentially the same as pay and includes all pay-related items such as basic salary and bonuses, as well as allowances but excludes benefits.

Continuous terms of service or Permanent terms or ‘on-going’ contracts

Contracts of employment where there is no stated period of employment and hence it can be assumed by both parties that the employment will continue until one or other party gives notice of termination or retirement age is reached. 

Contractual terms of employment

The details of the terms of employment set out in the contract of employment or appointment letter that create obligations on the part of the employer or employee.

Entry salary

The salary at which new recruits start the job or enter the pay structure.  Normally, but not necessarily, the minimum of the pay range for that job or the minimum of the grade.

Emoluments

Generally used to refer to cash or cash-equivalent payments to an employee (see also ‘pay’).

Grade (or ‘job grade’)

The name or description of the level for a particular job such that several jobs might be clustered into that particular grade and share the same pay range or pay scale.  Grades are sometimes defined by means of job evaluation scores or other means of describing jobs of similar size or worth.

Grievance and disputes

Usually relating to procedures that set out how staff can raise grievances with management or their immediate manager, or lodge disagreements, or can dispute decisions made by management.

Housing allowance

A cash allowance used to pay for or subsidize the costs of domestic accommodation for the employee and his or her family.  It may take many forms and be paid to the employee or direct to a landlord.  It may be described in many different ways such a mortgage allowance or rental allowance.

Involuntary termination

Termination of employment initiated by the employer such as redundancy, dismissal, forced retirement.

Job evaluation

A systematic process for establishing the relative value/worth of jobs within an organisation (or internal relativity). The process by which the ‘size’ of the job is determined usually by defining the jobs according to certain agreed factors (such as know-how, span of control, complexity etc) and applying a score to each factor.  Usually, the greater the evaluation score, the larger and more accountable the job and the higher the salary.

Non contractual terms of employment

Terms that may be set out in general but not specifically defining the amount and which may or may not be applied.  Especially applicable to a non-contractual bonus where it may be agreed that a bonus MAY be paid but the amount will vary and may not be paid at all.  Otherwise described as variable bonus or discretionary bonus.

Non-accountable cash allowance

A cash allowance that is paid where there is no need for the receiver to account for how it is spent.  It may be intended to cover certain specified costs but it makes no difference whether the expenditure actually took place or not and therefore how much of the allowance is saved.  It generally is treated as different from base pay and usually is not taken into account in determining pension benefits or contributions, or in calculating other allowances such as overtime.

Pay – fixed

A pre-determined level that applies to the job in question fixing the amount of pay that will apply to all holders of that particular job.

Pay level

The actual payment amount or quantum made to the individual or more usually the average of a group usually in comparison to others. Hence pay level survey to compare how much in real terms is actually paid to one group in comparison to another.

Pay or salary

Anything paid to the employee as cash or cash equivalent.

Pay points

A ‘ladder’ of predetermined pay levels that can be used to define the upper and lower range of salary that applies to a particular job.  Thus salaries are described by reference to the particular pay point assigned to the job and, one pay point will be a predefined amount higher or lower than the next pay point. Pay adjustments can either be made by increasing all the values of the pay points or incrementally by moving up the ladder to a higher pay point.

Pay policies

Pay policy sets out at a high level how processes should be designed and managed within the broader context of the organisation’s business strategies, culture and reward philosophy.  It provides a framework for management and for HR specialists to resolve particular and recurring pay issues like how much is paid.  It enables consistent decisions to be made where appropriate, while recognising the need for flexibility and the dangers of rigidity.

Pay ranges

A pre-determined upper and lower pay level that applies to a particular job/role/grade.  The range is from the minimum to the maximum point and any part of the range is accessible (i.e. no fixed steps or pay points).

Pay scale

A predetermined upper and lower pay level that applies to a particular job but with fixed steps or pay points in between such that only these fixed points can be used.

Pay strategies

The desired competitive pay position in relation to a specified group of other companies or the employment market as a whole, defining whether average salaries should be equal to higher or lower than the salaries paid by the comparison groups, and by how much.  e.g. median salary strategy or 75th percentile.

Pay structure

The relationship between different jobs and the mathematical or financial model describing the pay for all jobs within the organisation. Pay structure takes account of internal relativity, external competitiveness and where appropriate, negotiated rates for the job.  Types of pay structures are graded, broad-banded, job family, individual pay grade, pay curve, spot rate and pay spine.

Pay system

The system by which pay is administered and converted into payroll such that the ‘payroll system’ is a subset of the overall pay system, or simply put, the way organisations use or work the pay structure. A rather loose term that can be used to cover all aspects of the actual implementation of pay and all the rules and procedures that must be complied with.

Pay trend

The movement in pay from one year or period to the next usually expressed as a percentage increase or decrease. Hence pay trend surveys compare how much pay increases or decreases over the past 12 months.  It takes no account of the amount of pay (pay level) only the percentage change.

Performance based pay

Pay that is directly or indirectly related to the results archived by the individual, group or organisation or by the general standard of performance in the job that is considered to have been achieved.  It requires some method of measurement or assessment of performance in order to decide the pay level or pay increase that should apply.  The actual payment may be in the form of additional basic salary or bonus or commission.

Period contract or contract terms of service

Usually just referred to as contract terms in which the period of employment is precisely stated in the contract and may be for one, two or more years.  At the end of the contract employment ceases unless a new contract is offered and accepted.

Perks (perquisites)

A subset of benefits usually meaning the non- cash elements of the full range of benefits, which may or may not attract taxation. It is a commonly used description in N. America but in the UK generally refers to the privileges associated with the job, including size of office, provision of special car parking spaces or eating arrangements.

Quarters

The direct provision by the employer of accommodation or quarters for the employee and his or her family as an alternative to providing cash and leaving the employee to make his or her own arrangement. Such properties may or may not be owned by the employee, but if not directly owned the employer will take out the lease and handle all the payments for that property and allocate it to the employee.

Rank

Defines the level of seniority of the job such that high-ranking jobs are more senior and attract more pay than lower ranking jobs. Jobs of the same rank would be considered equal in status though the pay may be different.

Remuneration

Essentially the same as pay and including all cash items such as basic salary, allowances, bonuses etc but excluding non-cash benefits.

Reward

The combinations of financial and non-financial programmes (benefits) that serve to attract, reward, retain and motivate employees.