**Definitions**

**Definitions are divided into common
statistical terms, and HR terms.**

__Common Statistical Terms__

**Mean** - the most common measure of the centre of
a population. The ordinary arithmetic average.

**Median** - the "middle value" in a histogram
or stemplot ie. the number whereat half the observations are smaller,
and half are larger. The median is a useful measure of centre, and very
close to the median where the distribution is symmetrical, but can be
misleading in a skewed distribution.

**Range** - describes the spread of the distribution.
The range is the difference between the largest and smallest observations,
and again must be interpreted carefully where these observations are
outliers.

**Quartiles** - the quartiles mark out the middle half
of the data. The first quartile lies one quarter of the way up the list,
and is thus larger than 25% of the observations. The third quartile
lies three-quarters of the way up the list, and is thus larger than
75% of the observations. The second quartile is the median, which is
larger than 50% of the observations.

**The Five-Number Summary** - consistes of the smallest
observation, the first quartile, the median, the third quartile, and
the largest observation. These numbers are written in order from smallest
to largest and offer a reasonably complete description of centre and
spread.

**Standard Deviation** - a measure of spread which
looks at how far the observations are from their mean.

**Correlation** - The correlation measures the strength
and direction of the linear relationship between two quantitative variables.
Like the mean and standard deviation, correlation is strongly affected
by a few outlying observations, and must be used with caution when outliers
appear in a scatterplot.

**Normal distribution** - the most common bell-shaped
(symmetrical) distribution, used frequently as a basis for statistical
inference. The fact that many naturally occuring phenomena are distributed
normally does not mean that organisational phenomena should be. Many
salary distributions are non-normal.

__Relevant HR Terms__

**A-F
G-L M-R S-Z**

**Base Salary** - standard salary which
an employee receives for doing a job. It is used as the basis for calculating
other allowances and benefits.

**Benchmark job or Key job** - a job that is similar
or comparable in content across firms.

**Benefits** - All financial rewards that are not paid
directly in cash to the employee, e.g. annual leave, maternity leave.

**Bonus** - A discretionary reward, usually provided
after the achievement of a goal.

**Central tendency **- A common error that occurs when
every employee is incorrectly rated near the average or middle of the
scale.

**Certified Compensation Professional (CCP)** - A person
who has successfully completed the certification program of the American
Compensation Association.

**Compa-ratio** - The ratio of an actual pay rate (numerator)
to the midpoint for the respective pay grade (denominator). Compa-ratios
are used primarily to compare an individual's actual rate of pay to
the midpoint or some other control point of the structure. A compa-ratio
can be calculated for a group of people, a department, or an entire
organisation.

**Compensation** - what employees receive in exchange
for their work. Includes pay and benefits (total compensation) or just
pay (cash compensation).

**Contingent compensation** - any pay or benefit, the
receipt of which depends on some behaviour or productivity of the employee.

**Cost-benefit analysis** - involves an evaluation
of the tangible and intangible costs and benefits resulting from a decision.

**Cost-of-living allowance** - designed to protect
the expatriates standard of living from cost of living differences between
the host country and the home country and to offer some protection against
exchange rate fluctuations.

**Data analysis** - Market data for RMA surveys is
presented using normal arithmetical calculations as well as a percentile
analysis. In providing the percentile analysis of data the the following
statistical formula is used: **P(n+1)/100**; where **P** is the
percentile, and **N** is the total number of data points.

**Downsizing** - a reduction in a company's work force
to improve its bottom line.

**Equity funding** - the funding of a portion of a
retirement plan by investment in equity. Equity funding affects the
employer's contributions, but not the employee's benefits.

**Expatriate package** - total compensation and benefits
given to personnel on a foreign assignment. Includes base salary, foreign
service premium, hardship allowance, housing assistance, education allowance,
relocation allowance and other special allowances and benefits associated
with a foreign assignment.

**Grading** - employee's performance
is matched with a specific grade definition such as superior, good,
acceptable, marginal and unsatisfactory.

**Guaranteed Pay** - Annual basic salary plus all elements
of the incumbents compensation package that are paid through payroll
on a monthly or annual basis. These are not those that are subject to
reimbursements at actuals. The items of pay that can be considered to
be of a guaranteed nature largely include such items as Housing Allowance,
Transport or Car Allowance, Fixed Bonus, Meal Allowance, etc. These
are items that can be considered a regular element of cash compensation.

**Human resources management** - involves the productive
use of people in achieving the organisation's strategic business objectives
and the satisfaction of the individual employee's needs.

**Incentive compensation** - compensation that is linked
to performance by rewarding employees for actual results achieved instead
of seniority or hours worked.

**Job family** - jobs involving work of the same nature,
but requiring different skill and responsibility levels. For example,
Applications Programming is a job family; Senior Applications Programmer
is a job (skill/responsibility level) within that family.

**Job grade** - one of the classes, levels or groups
into which jobs of the same or similar value are grouped for compensation
purposes. Usually, all jobs in a grade have the same pay range: maximum,
minimum and midpoint.

**Job pricing** - the practice of establishing wage
rates for jobs within the organisation, usually combining judgements
regarding market value and internal job-evaluation results.

**Market pricing** - a wage-and-salary
policy that sets the rates to be paid for a job to the organisation's
best estimate of the going wage rate in the external marketplace for
that job. Estimates of what the market would pay for a job, based on
what it pays for similar jobs, are used to price jobs for which market
data are not available.

**Merit increase** - an adjustment to individual salary
based on performance, or some other individual equity basis.

**Performance management** - a managerial process which
consists of planning performance, managing performance through observation
and feedback, appraising performance, and rewarding performance.

**Target compensation **- the expected
pay for a position, including both base pay and at-risk pay. The variable
portion of target compensation is based on what the employee ought to
earn on average, given satisfactory performance. High performers will
exceed target earnings and poor performers will fall short of the target.

**Total cash** - This is the sum of guaranteed pay
plus variable bonuses and commissions. These are payments that can vary
from year to year depending on various factors such as individual or
company performance.

**Total compensation** - This is defined as total cash
plus the valued perquisites and benefits. In valuing perquisites and
benefits we have provided values to facilities provided to employees
that have to be claimed before being paid, and also the value of long
term benefits. Some items that have been included in this valuation
in our surveys are medical expenses, vacation tickets, childrens education,
terminal benefits (gratuity, provident fund, social security), share
purchase plans, club memberships etc.

**Upgrading** - the advancement of a job to a higher
salary grade.

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