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New to HR or compensation? Have no fear. We've compiled a list of high-level compensation terms for you to review. Be sure to bookmark this page as a point of reference, or check your SAP SuccessFactors Help Guide, if you're an existing customer.

A fixed amount that is usually added to an employee's salary to bring their salary at par with company standards. Adjustments are usually granted to employees who are compensated relatively low within the pay grade.

Anniversary Based Process
An event or planning process that occurs around the yearly anniversary date of each employee.

Bonus Pay
A variable component of pay that can be based on individual, group or company performance. Sometimes referred to as Short Term Incentive or Pay for Performance.

An internal comparison that compares an individual's pay with a market anchor or pay range midpoint. Compa-ratio is calculated as follows: 

(Employee pay or average salary) divided by (midpoint of pay range)

For example, if an employee is paid $34,250 and the salary mid-point level is $37,590, the employee would be approximately 9 percent below midpoint — calculated as 34250/37590=.09.

Compensation Form Template
A configuration file which contains all the guidelines that pertain to a compensation process, usually for the whole organization. The guidelines within a template include general display configurations (ex. Labels), as well as all the guidelines which may vary for different groups of people that differ by pay grade, performance etc. A compensation form template is similar to a form template (that is edited in the provisioning tool).

Compensation Form
A compensation form is an instance of the compensation form template. Like a Performance Review form, this form can be routed through different stages, such as modify, signature, and completed. In a normal compensation process, a compensation form is created for each compensation planner, usually a people manager, which then goes through the configured workflow until it is completed.

Compensation Planner
A user within the application that has the permissions to make compensation recommendations on a compensation plan, usually the direct manager. In some cases, the second level manager might be involved too.

Focal Process
A compensation planning event for a group of employees that happens in the same period. For example, compensation planning for the company happens in December.

Focal Salary Planning
All employees within a specific group receive compensation adjustments at the same time as against their anniversary date.

Lump Sum
Fixed amount that increases compensation, but does not affect the base salary; used usually for employees compensated relatively high within the pay grade.

Market Index
An external comparison that compares a range midpoint with data for the market average pay.

An increase applied to current salary typically based on performance rating and current pay relative to benchmark.

Merit Matrix
Matrix whose entries provide guidelines to merit increases depending on the performance rating.

Off-cycle Adjustments
Pay changes that take place outside of the focal planning period. For example, a Promotion or job change.

Pay grade (Job Grade)
Groups in which jobs of the same or similar value are grouped for compensation purposes. Usually all jobs in a grade have the same pay range: min range, mid range, and max range.

Range Penetration
The level of an individual's pay compared with the total pay range. Range Penetration is calculated as follows: 

(Employee's Pay - Min Range) divided by (Max Range - Min Range)

Consider the following example: 

Employee's Pay — $34,250 | Min Range — $31,068 | Max Range — $44,112

In this example, ($34,250-$31,068) divided by ($44,112-$31,068) is equal to 0.24, which works out to 24% range penetration.

Stock Compensation
Optional compensation element used to allocate stock or stock options to eligible employees. Sometimes referred to as Long Term Incentive.

Ready to automate compensation? Learn more about SAP SuccessFactors Compensation here, and then schedule a complimentary demo with one of our experts.

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