DEFINITIONS AND TERMS

RELATING TO COMPENSATION

PAY PLAN:    An established policy and procedure for administering pay for the jobs in an organization, usually subject to revision and change over time.  

PAY RANGE  : An individual span of salary amounts consisting of an established breadth (usually 45% to 65% from minimum to maximum) which is used to establish pay for one or more specific sets of duties and responsibilities designated as a job class.

GRADE: An identifying number assigned to a pay range for administrative purposes.

These are usually arranged chronologically from lowest to highest.

RANGE MINIMUM: The lowest amount paid in a pay range.

RANGE MIDPOINT:  The amount which represents the approximate middle of a pay range. This is usually set to align with the desired target point in the labor market.

RANGE MAXIMUM: The amount which represents the maximum amount which will be paid to an employee in a pay range.

STEP:  The pay levels between the minimum and the maximum of a pay range. These are used for administrative purposes and to assist in the distribution of employee pay within a range.

OPEN RANGE: The portion of the pay range above the midpoint or Job Rate up to the range maximum where pay movement is based on performance ratings.

RANGE ADJUSTMENT: An action which changes the dollar amounts of the minimum, midpoint, maximum and steps of a pay range. May also be called a Market Adjustment.

PAY COMPRESSION: A situation which occurs when less-experienced and more-experienced employees are paid the same or almost the same. Usually results in poor employee morale and dissatisfaction.