Compensation Terms Glossary

Compensation terms

Compensable factor

A job attribute described in a job evaluation plan that provides the basis for evaluating the relative worth of a job inside the organization. Each compensable factor has a number of different degree levels on which jobs are evaluated. Examples of compensable factors used in the evaluation of jobs at Missouri State University include the experience and/or education required to perform a job, the supervisory responsibility associated with a job, the interactions that are required as part of performing a job, or the physical requirements involved in carrying out job duties or responsibilities. In order to facilitate compensation administration, each job family within the University had a unique set of compensable factors so that the various duties and responsibilities could be more accurately described and evaluated.

Compensation matrix

A device that formally incorporates both individual performance ratings and pay equity into the process of determining individual pay increase percentages. Other things being equal, individuals receive greater percentage pay increases (1) the higher their performance evaluation scores, and (2) the lower they are in their salary ranges. The Compensation Matrix embraces two principles. The first principle is that principles of merit require that higher performing employees should receive greater pay increase percentages than those who perform less well. The second principle is that standards of equity dictate that when individuals are at similar levels of performance, those individuals at the bottom of a salary range should receive higher percentage pay increases than individuals at the top of the salary range.

Degree level

Levels within a compensable factor that are defined on a continuum from the minimum amount of a compensable factor that is required by a job to the maximum amount of a compensable factor that is required by a job. Using a supervisory responsibilities compensable factor as an example, if a job does not require an individual to exercise supervision over others, then that job would receive a lower degree level rating than a job that requires supervision of a specific unit or department. Conversely, a job that requires general administration over multiple units would receive a higher degree level rating than a job that requires supervision of a small number of full-time employees. It is important to keep in mind that when determining the degree level of a job, only the minimum requirements and essential duties and responsibilities of the job be considered, not the attributes of the individual in the job. Each degree level within a compensable factor has an associated number of job evaluation points that, when totaled for each job, creates an internal hierarchy of jobs and, used in combination with salary survey data, can help to determine the salary range of a job.

Essential duties and responsibilities

The parts of a job that cannot be assigned to another employee, or activities that an individual that holds the position must be able to perform unaided or with the assistance of a reasonable accommodation (as defined by the Americans with Disabilities Act). A duty or responsibility is considered to be essential when a position exists to perform it, when the duty or responsibility is highly specialized, and/or when there are a limited number of other employees available to perform the duty or responsibility.

Green-circled

Green-circled refers to the relationship between an individual's actual pay with their assigned pay grade and salary range. If an employee is "green-circled," this indicates that the individual is being paid at a rate that is below the minimum of the salary range associated with the pay grade their job has been assigned to.

Internal hierarchy

The relationship among jobs at an organization that is based on the content of the work performed and each job's relative contribution to achieving the organization's objectives.

Job

Work consisting of responsibilities and duties that are sufficiently alike to justify being covered by a single job description. A job refers to the combination of duties and responsibilities that are carried out by a person in that job, not the person, and as such, a job may be assignable to more than one employee (i.e., the job of Administrative Assistant II is held by more than one person, but these individuals are in the same job because they all perform similar duties and responsibilities).

Job analysis

The systematic process of collecting information related to the specific nature of a job that provides the knowledge needed to define jobs, write job descriptions, and conduct job evaluation. There are a number of methods for conducting job analysis, including the interviewing of job incumbents, supervisors, and/or subordinates, observation of job incumbents performing their job, and surveying job incumbents (including administering a task inventory).

Job description

A summary of the most important features, or essential duties and responsibilities, of a job. A job description identifies the nature of the work that is performed, specific duties and responsibilities, outcomes of the performance of these duties and responsibilities, and the employee characteristics (education, experience, skills, etc.) required to perform the job.

Job evaluation

A systematic procedure designed to aid in establishing pay differentials among jobs using a set of compensable factors contained in a job evaluation plan. During job evaluation, a job is assigned a degree level on each compensable factor in the job evaluation plan based on the amount or extent of a compensable factor that is required by a job. Job evaluation is based strictly on the minimum requirements and essential duties and responsibilities of a job, and not on the level of performance of an individual in a job. Job Evaluation at the University was carried out by several committees of job incumbents and supervisors that have knowledge of the jobs they were asked to evaluate. Job Families 1, 2, and 3 each had one Job Evaluation Committee, and Job Family 4 had five Job Evaluation Committees due to the large number and diversity of jobs in Job Family 4.

Job evaluation plan

The job evaluation plan is a document that contains the compensable factors, degree levels, and job evaluation points that are used in job evaluation. Each job family at the University has its own job evaluation plan because of the unique nature of the work that is performed by the jobs in each job family. A job is evaluated using the job evaluation plan that is associated with the job family that it belongs to.

Job evaluation points

The numerical representation of a degree level. Once job evaluation has been completed, the points for each degree level are summed for a job, and the total job evaluation points for all jobs are used to create an internal hierarchy of jobs. The total job evaluation points for a job can also be used to determine the salary range for jobs that do not have salary survey data by using benchmark jobs, or jobs that have salary survey data, to establish a dollar value per job evaluation point.

Job family

A group of jobs involving work of the same nature but requiring different skill and responsibility levels. Jobs at the University have been divided into four different job families. Job Family 1includes all administrative support and clerical employees and nonexempt accounting, bookstore, and library employees. Job Family 2 includes crafts, trades and service workers. Job Family 3 includes computer operators, programmers, technicians, and Information Technology employees. Job Family 4 includes executive, managerial, professional, paraprofessional, and administrative employees.

Market pay

The average salary that is being paid for a job in a defined labor market. Market pay for jobs at the University was determined using salary survey data from a variety of sources including, but not limited to: CUPA, AIM, and Salary.com.

Merit pay

A reward that recognizes outstanding past performance. Merit programs are designed to pay different amounts depending on an individual's level of performance.

Minimum requirements

Also referred to as job specifications, the minimum requirements refer to the attributes that an individual must possess in order to perform a job or to be considered for a job. These attributes can include the level of education, type and amount of experience, training, physical abilities, and other skills and abilities.

Pay grade

One of the classes into which jobs of the same or similar values are grouped. All jobs in a pay grade have the same salary range - maximum, midpoint, and minimum. Each job family has its own set of pay grades and associated salary ranges, and the midpoint of each salary range represents the market pay for jobs in that pay grade. Keep in mind that the new pay grades and salary ranges bear no relationship to the former pay grades and salary ranges at the University. The first digit in the pay grade represents the job family that the pay grade is associated with. The second digit identifies the grade level within the job family.

Position

Work consisting of responsibilities and duties assignable to one employee. In instances when there is only one person with a certain job title or job description, then the position is the same thing as a job. If however, there are multiple individuals with the same job title or job description, then each individual is in its own position. In other words, a position represents a specific person in a job and the unique duties and responsibilities that person performs.

Quartile

One-fourth of a salary range associated with a pay grade. Each pay grade has been divided into four parts based on the salary range associated with the pay grade, and an individual's salary determines which quartile they belong to. The quartile an individual belongs to and their performance evaluation are used in the Compensation Matrix to determine the percentage pay increase they will receive for the year.

Reclassification

A change in a position's job title and/or pay grade based on a significant change in job duties and the level of responsibility, as revealed in a review of the position by the Office of Human Resources.

Red-circled

Red-circled refers to the relationship between an individual's actual pay with their assigned pay grade and salary range. If an employee is "red-circled," this indicates that the individual is being paid at a rate that is above the maximum of the salary range associated with the pay grade their job has been assigned to.

Salary range

The minimum and maximum dollar amount that is paid to jobs in a specific pay grade. The salary range is based on salary survey data for the jobs in each pay grade, where the minimum of the salary range approximates the 25th percentile of market pay, the midpoint approximates market pay, and the maximum approximates the 75th percentile of market pay of all jobs in the pay grade. Salary ranges will be updated a regular basis to keep up with changes in market pay.

Salary survey data

Information about market pay that has been collecting through a systematic process of reviewing the compensation paid by other employers and is used to design pay grades and salary ranges.

Task inventory

An approach to job analysis that involves constructing a list of task statements, or descriptions of specific behaviors that are performed on the job, and asking job incumbents (individuals in jobs) to indicate whether or not they perform a task, and if so, the frequency, difficulty, and importance of performing that task. Individuals in jobs in Job Family 1 were asked to complete a task inventory to aid in the creation of new job descriptions that more accurately reflect the work that is performed by individuals in Job Family 1 jobs.

References

Henderson, R.I. (2000). Compensation Management in a Knowledge-Based World, 8th Edition. Upper Saddle River, NJ: Prentice Hall.

Heneman, H.G. & Judge, T.A. (2006). Staffing Organizations, 5th Edition. Middleton, WI: Mendota House.

Milkovitch, G. T. & Newman, J.M. (2008). Compensation, 9th Edition. New York, NY: McGraw-Hill/Irwin.