7.9 Key Terms

Key Terms

Broadbanding: similar to a pay grade system, except all jobs in a particular category are assigned a specific pay category. (7.4)

Comparable worth: states that people should be given similar pay if they are performing the same type of job. (7.5)

Compensation: pays workers for work completed and provides incentives to motivate employees that results in loyalty and happiness on the job. (7.1)

Competency-based pay: salary levels are based on the employee’s traits or characteristics as opposed to a specific skill set. (7.4)

Defined Benefits (DB) Plans: provide a specific and predictable benefit when a person retires. It is guaranteed income for life. (7.7)

Defined Contribution (DC) Plans: when the employer and the employee make contributions toward the retirement plan. (7.7)

Delayering and banding process: cuts down the number of pay levels within the organization. (7.3)

Equity Theory: concerned with the relational satisfaction employees get from pay and inputs they provide to the organization. (7.4)

Equal pay for work of equal value: refers to jobs that are comparable in worth to the company, and the employees should be paid the same. (7.5)

Expectancy theory: says that employees will put in as much work as what they expect to receive in return for it. (7.4)

External equity: relies on paying employees that is perceived to be fair based on what they market is paying. The company compares their own pay to what other similar companies are paying their employees. (7.2)

Financial Services: allow employees to buy services or products from the company at a discount. (7.7)

Going rate model: analysis of the going rate for a particular job at a particular time is considered when creating the compensation package. (7.3)

Hay profile method: proprietary job evaluation method focuses on three factors called know-how, problem solving, and accountability. (7.3)

Incentive: often called a pay-for-performance incentive, is given for meeting certain performance standards, such as meeting sales targets. (7.4)

Internal equity: a perceived equity among different jobs within a company. In other words, jobs that are similar should have similar value, and receive similar pay. (7.2)

Internal pay equity: focuses on employees within the same organization. Within the same organization, employees may look at higher level jobs, lower level jobs, and years with the organization to make their decision on pay equity. (7.4)

Job classification system: every job is classified and grouped based on the knowledge and skills required for the job, years of experience, and amount of authority for that job. (7.3)

Job evaluation: the process of determining the relative worth of jobs to determine pay structure. (7.3)

Lag: means to pay less than market value. This is often called the organizational compensation philosophy. Other definitions are describes above with market plus and market minus philosophy. (7.1)

Lead: means to pay higher than that the market value. Match means to match other companies who have similar products and services. This is often called the organizational compensation philosophy. Other definitions are describes above with market plus and market minus philosophy. (7.1)

Mandatory benefits: are provided by the employer due to the laws and the provincial regulations. (7.7)

Market compensation policy: to pay the going rate for a particular job, within a particular market based on research and salary studies. (7.1)

Market minus philosophy: a company will pay a particular percentage less than the market. (7.1)

Market plus philosophy: a company will determine the going rate and add a percentage to that rate. (7.1)

Paired comparison: individual jobs are compared with every other job, based on a ranking system, and an overall score is given for each job, determining the highest-valued job to the lowest-valued job. (7.3)

Pay: is the hourly, weekly, or monthly salary an employee earns. (7.4)

Pay equity refers to equal pay for equal work when similar jobs are performed, and where men and women are completing the same work. (7.5)

Pay grading: this is the process of setting the pay scale for specific jobs or types of jobs. (7.3)

Reinforcement Theory: developed by Edward L. Thorndike (Indiana University, 2011), says that if high performance is followed by some reward, that desired behaviour will likely occur in the future. (7.4)

Skill-based pay: salary levels are based on an employee’s skills, as opposed to job title. (7.4)

Social services: are called employee assistance programs that may help with elder care or child care, counselling services, providing mental health services, and help with substance abuse. (7.7)

Total Compensation Package: or sometimes known as Total Rewards. A compensation package can include wages or salary, perks, amenities, health-care benefits, and other benefits such as retirement plans that is offered by the company in exchange for work performed. (7.2)

Variable pay system: This type of system provides employees with a pay basis but then links the attainment of certain goals or achievements directly to their pay. (7.4)

Voluntary benefits: are benefits that are at the discretion of the employer. (7.7)


7.9 Key Terms” from Human Resources Management – 3rd Edition by Debra Patterson is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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