Compensation Dictionary

In an effort to provide our readers with valuable resources, we have put together this dictionary of key compensation terms that will be helpful to anyone in the compensation field. Here you will find all the terms you need to know to have a good grasp on the language of compensation.

The Compensation Dictionary is also available as a PDF.

There are currently 7 Compensation Terms in this directory beginning with the letter B.
BASE PAY OR BASE SALARY
The initial rate of fixed compensation an employee receives in exchange for work performed and excludes benefits, bonuses and overtime.

BENCHMARK JOB
A position or job that is common in the market across various companies and industries and serves as a shared point of comparison in evaluating compensation levels.

BLACK-SCHOLES METHOD
A model used for calculating the theoretical value and determining the fair price of European style options based on six variables: time, strike price, type of option, underlying stock price, volatility, and risk-free rate.

BONUS
An amount of money paid to an employee in addition to their base pay as a reward for performance.

BONUS TARGET
A percentage of base salary that an executive is eligible for on annual basis if the Company achieves certain results and/or the employee achieves certain personal goals.

BROAD BAND
The broadest salary grouping in a compensation system that encompasses several pay levels, ranges or grades.

BURN RATE/RUN RATE
Measures how fast a company’s cash holdings are decreasing or the rate at which their cash pool is depleted (negative cash flow); typically calculated monthly.


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