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 8 Compensation Terms in this directory beginning with the letter P.
PAY GRADE
A level within a pay range in which multiple roles with similar internal and market value can be grouped into.

PAY-FOR-PERFORMANCE
A compensation structure based on individual or company performance during a given time frame.

PEER GROUP ANALYSIS
The process in which a group of companies of similar size, industry, revenue and geographical location are analyzed to compare and establish reasonable and competitive compensation levels.

PERFORMANCE SHARE
A share of company stock vested upon achievement of company-wide, previously-defined performance objectives over a multi-year period (typically three years).

PERFORMANCE VESTING
Refers to plans in which vesting only occurs once performance-related goals and specified conditions are met.

PERQUISITES
Rights, privileges, benefits, or advantages outside of regular salary or wages (ex. health insurance, automotive allowance); also referred to as “perks.”

PHANTOM STOCK PLAN
A benefit plan offered to employees (upper level executives) that provides stock ownership benefits without giving them any actual company stock. Phantom stock follows the fluctuations of the company’s actual stock and results in higher or lower payouts as stock prices rise or fall. Phantom stock plans may be tied to performance metrics and only pay out if certain targets are met. Like other forms of stock-based compensation, phantom stock plans serve to align employee and shareholder interests while incentivizing and retaining key employees.

PROFIT-SHARING PLAN
A type of retirement plan in which employers make discretionary contributions based on quarterly or annual earnings, giving employees the opportunity to share in the profits of the company. Contributions are made only by the employer and are completely discretionary, meaning the company decides when and how much of its profits it wishes to share.


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