Like other professionals, compensation professionals can throw around a bunch of terms and acronyms that may or may not make a lot of sense to those not in the field. And, when we’re asked what they mean, we’re sometimes stymied when providing easy to understand definitions that are clear and concise.
Other times, however, we get some terms all muddled up with each other. Just last week, I was asked the difference between compa-ratio and range penetration and had to check to be sure I was accurately explaining both terms. With that in mind, here’s a short overview of compensation terms that are sometimes confused with one another.
Blended Job vs. Hybrid Job
Blended and hybrid jobs are the same. Both are a job with multifunctional responsibility for a combination of different areas, often found within the administration and/or operations area of an organization.
Call-In/Callback Pay vs. Reporting Pay
All of these terms refer to the minimum pay guaranteed to a worker. Call-in, callback pay is the term used when an employee is recalled to work after completing the regular work shift. Reporting pay, however, is the term used when a worker who is scheduled to work, reports for work, and finds no work available, or less work than can be done in the guaranteed period, usually 2 to 4 hours in all three situations.
Comparable Worth vs. Equal Pay for Equal Work
A method of setting compensation that provides equal pay for work of equal value, comparable worth is often used as a means of achieving parity in pay for employees in jobs with pay traditionally lower than comparable positions.
Equal pay for equal work refers to a policy denoting, or a demand for, payment of equal compensation to all employees in an establishment performing the same kind or amount of work, regardless of race, sex, or other characteristics of individual workers not related to ability or performance.
Compa-Ratio vs. Range Penetration
The relationship of base pay to the market, expressed as a percentage of the midpoint of the salary range, is the compa-ratio. To determine compa-ratio, an employee’s base salary is divided by the midpoint of the salary range for his/her position.
Range penetration, however, is the level of an individual salary compared to the total pay range. To determine range penetration, an employee’s base salary is divided by the maximum of the salary range for his or her position.
Defined Benefit Plan vs. Defined Contribution Plan
A defined benefit plan is a retirement plan that uses a specific, predetermined formula to calculate the amount of an employee’s future benefit. In the private sector, defined benefit plans are typically funded exclusively by employer contributions. In the public sector, defined benefit plans often require employee contributions.
A defined contribution plan, including 401(k), 403 (b), 457 plans, are retirement plans in which the employer makes specified contributions but the amount of the retirement benefit is not specified. Also, defined contribution plans may be wholly or partially funded by employers but, generally, require employee contribution.
Green Circle Rate vs. Red Circle Rate
Also known as a blue circle rate, the pay rate of a nonprobationary worker that falls below the established rate range for workers performing the same duties is considered a green circle rate.
A red circle rate (aka, an out of line rate or flagged rate) is a wage rate that exceeds the formal pay rate or range of rates for a job, often due to the employee’s long service with the company, superior skills, or other factors.
Hazard Pay vs. High Time Pay
Hazard pay is additional pay made to an individual worker or a group of workers working under dangerous or undesirable conditions. High time pay, however, refers to extra pay for workers engaged in a job high above ground, though it is sometimes also applied to work below ground level with extra dangers or discomforts.
Mean Vs. Median
The mean is the average of a set of numbers. It is used in market pricing as a straight average—each survey source gets one “vote.” The median, or midpoint, is the value that lies at the middle of a distribution of numbers. In salary survey data, the median is the 50th percentile.
Range Spread vs. Rate Range
Also known as grade spread, range spread is the difference between the minimum and the maximum dollar amounts within a salary range or job grade, expressed as a percentage. Typically, range spread can be as low as 20% for hourly jobs and up to 50% or more for high-level positions.
Expressed in dollar amounts, rate range is the spread of salaries paid for jobs assigned to the same salary grade. Essentially, the lower and upper limits of wage rates paid to workers in a given occupation. For example, the rate range for an administrative assistant might be $20,000 to $35,000 per year or expressed as $10 to $17 dollars per hour.
|Sharon L. McKnight, CCP, SPHR, draws from more than 20 years of management experience, including 6 years as a director of human resources, to develop compensation administration tools and write about compensation issues. Her experience in both operational and HR management provides her with a practical approach to providing online resources that address the challenges facing compensation and human resource professionals.|