Assessor Series FAQ #14

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Frequently Asked Questions

QUESTION:  What do the "incentive" amounts represent?

In the Assessor Series, ERI uses the following definitions of Incentives to refer to differing components of variable compensation:

The Salaries by Experience/Size tab in the Salary Assessor profiles the Base Salary, Total Compensation, and Incentive data of a specific position.

The Individual Profile tab in the Executive Compensation Assessor profiles the Base Salaries, Total Compensation, and Incentive data of a specific position. For top jobs in the Executive Compensation Assessor, information on these compensation components is provided under the Survey and Proxy Analysis tab.  This tab provides Salary, Bonus, Total Cash (base + bonus), Stock Awards, Options Awards, Non-Equity Compensation, Change in Pension, etc., and All Other Compensation.  Additional information on Pensions and other components of compensation is available by viewing the proxy statement of individual organizations.

It is important to note how ERI uses the heading of Incentive or Annual Incentive. In both the Salary Assessor and the Executive Compensation Assessor, this heading refers to the annual dollar amount of cash incentives (annual bonuses, commissions, or other cash incentives).  The heading of Incentive or Annual Incentive does not include Stock Awards, Options Awards, Non-Equity Compensation, Change in Pension, etc., or other non-cash incentives.  These components are listed separately.

ERI determines the amount of the Incentive or Annual Incentive by taking the average dollar amount of the Incentive or Annual Cash Incentive for all the incumbents whether or not they are cash-incentive eligible.

For example, there are 1,000 employees in a job classification.  Eight hundred employees are bonus/commission eligible.  Among the 800 employees who are bonus/commission eligible, a total of $200,000 dollars in annual bonuses/commissions is paid to 700 employees, while 100 of the bonus commission eligible employees receive no bonus/commission pay due to their individual and or company's performance.  Out of the 1,000 employees in the classification, two hundred employees work for companies without a bonus/commission plan, so they receive no bonuses/commissions.  The average Incentive or Annual Incentive (or bonus/commission) shown by ERI is $2,000 (or $200,000 divided by 1,000 total employees).

For a definition of "base salary," see Assessor Series FAQ #36.

For a definition of "total compensation," see Assessor Series FAQ #37.

For the purposes of Distance Learning Center courses, the following definitions apply:

Incentive is defined as, "Additional pay (above and beyond the base salary or wage) awarded to an employee, such as stock options or a contingent bonus plan, that is 'forward looking'."

Bonus is defined as, "Plans that award cash or other items of value, such as stock (or stock options), based on accomplishments achieved.  While incentive plans are 'forward' looking' bonus plans are 'backward looking'."

For more definitions of compensation terms, please see the Online Business Glossary provided by the ERI Distance Learning Center.