commission
Compensation is the HRM function that deals with every type of reward that individuals receive in return for performing organizational tasks.

competency-based pay
A combination of skill-based, knowledge-based, and credential-based pay system.

cost-of-living adjustment (COLA)
Wage increase or decrease pegged to the rise and fall in the cost-of-living index.

credential-based pay
Pay based on the number and type of credentials (i.e. CPA, CFA) a person has earned.

differential piece rate (Taylor plan)
A piecework plan that pays on the basis of two separate piecework rates: one for those who produce below or up to standard and another for those who produce above standard.

feedback pay
The degree to which carrying out the work activities required by the job results in the individual's obtaining direct and clear information about the effectiveness of his or her performance.

gainsharing plans
Companywide group incentive plans that, through a financial formula for distributing organization wide gains, unite diverse organizational elements in the common pursuit of improved organizational effectiveness.

guaranteed annual wage (GAW)
A plan in which the employer guarantees the employee a certain number of weeks of work at a certain wage after the worker has passed a probation period.

knowledge-based pay
Knowledge-based pay rewards employees for acquiring additional knowledge both within the current job and in new job categories.

merit pay
Individual pay increases based on the rated performance of the individual employee in a previous time period.

open system
A pay system where pay ranges and even an individual's pay are open to the public and fellow employees.

pay compression
A situation in which employees perceive too narrow a difference between their own pay and that of their colleagues.

production bonus system
An individual incentive system that pays an employee an hourly rate plus a bonus when the employee exceeds the standard.

profit-sharing plans
Profit-sharing plans distribute a fixed percentage of total organizational profit to employees in the form of cash-deferred bonus amounts.

salary
Pay calculated at an annual or monthly rate rather than hourly.

secret system
A compensation system where pay is regarded as privileged information known only to the employee, the supervisor, and staff employees such as HRM and payroll.

severance pay
An income bridge from employment to unemployment and back to employment, provided by some employers.

skill-based pay
An alternative to job-based pay that sets pay levels on the basis of how many skills employees have or how many jobs they can do.

spot gainsharing
A gainsharing system that focuses on a specific problem in a specific department rather than on performance improvements for the whole organization.

standard-hour plan
An individual incentive plan that sets wages on the basis of completion of the job or task in some expected period of time.

straight piecework
An individual incentive plan where pay fluctuates on the basis of units of production per time period.

supplementary unemployment benefits (SUB)
The employer adds to unemployment compensation payments to help the employee achieve income security.

total compensation approach
Total compensation is made up of base pay, variable pay, and indirect pay (benefits).

variable pay
Any compensation plan that emphasizes a share focus on organizational success, broadens the opportunities for incentives to nontraditional groups (such as nonexecutives or nonmanagers), and operates outside the base pay increase system.

wage
Pay calculated at an hourly rate.