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 5 Compensation Terms in this directory beginning with the letter E.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
A benefit offered to employees that allows them to own stock in the company without having to buy shares. The plan is funded by employer contributions that are held in a trust and are tax-deferred until the employee retires or leaves the company. Distributions are tied to vesting, meaning employees earn shares for each year of service and compliance with certain covenants.

EMPLOYEE STOCK PURCHASE PLAN (ESPP)
A program offered by a company which allows employees the option to purchase company shares at a discounted price through after-tax payroll deductions and includes four phases: grant, offering period, transfer and disposition. The grant phase grants employees the option to purchase stock at a predetermined cost. The offering period is the time during which the employee’s payroll deductions accumulate for the future purchase of shares. Following the offering period, in the transfer phase, the employer uses the money saved by the employee to purchase company shares and transfers ownership of those shares to the employee. The disposition phase is when the employee sells, trades, exchanges or transfers the shares.

EQUITY COMPENSATION PLAN
A form of non-cash pay an organization can offer its employees to encourage retention by allowing them to partake in ownership of the company through various plans such as stock options, performance shares and restricted stock. Participating employees can share in the organization’s profits through appreciation.

EXECUTIVE BENEFITS
Beyond salary and cash compensation, these benefits provide an additional way to reward and retain key executives and employees. Examples include: 401k, SERPs, stock options, golden parachutes, etc.

EXEMPT EMPLOYEE
An employee exempt from the Fair Labor Standards Act (FLSA) regulations and therefore excluded from minimum wage and overtime requirements. Exempt employees are paid a yearly salary rather than an hourly wage.


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