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Abbott-Langer & Associates Business Glossary

This glossary of business definitions contains over 2,000 business terms used in compensation and benefits administration. Continually updated, this specialized business dictionary focuses on definitions of Human Resources terms and business terms.

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Back Pay

The amount of lost earnings accruing between the time a plaintiff terminates employment and a subsequent measuring date. Like Front Pay, it is not subject to the Civil Rights Act of 1991 $300,000 liability cap. Each can be awarded over and above any compensatory or punitive damages.”

Back-Loaded Policy

A life insurance policy (usually a universal life insurance policy) in which most of the expense charges occur when the policy owner surrenders the policy or makes cash withdrawals from the policy. Such charges are usually highest in the early policy years and are often eliminated at the end of a certain number of years. See also front-loaded policy and universal life insurance.

Back-Loading

The practice of providing a higher accrual of pension benefits during a participant's later years of employment. The practice is designed to encourage and reward long service.

Backup Withholding

Refers to withholding 20% of payments for federal income taxes unless the payee has a correct Social Security number on file with the employer, or is otherwise not subject to withholding.

Bail Out

An acquisition transaction (usually initiated by the seller) in which the seller is in poor financial condition and another company purchases the financially troubled company and improves their financial condition.

Balance Sheet

A financial statement of a company or other entity, showing what it owns (assets), what it owes (liabilities), and the owner's investment (shareholders equity) in the entity at a point in time such as the end of the fiscal year.

Balance Sheet Approach

An accounting term that describes a situation where debits and credits must match. The balance sheet approach is used to set expatriate compensation. There the goal is to protect or equalize an expatriate's purchasing power while on assignment abroad. Its primary objective is to ensure equity among expatriates and their home or base country peers.

Band Grading

The grouping of life insurance policies according to death benefit amounts for the purpose of calculating loading.

Bankruptcy

A standard bankruptcy liquidates a business or individual. Then, subject to specific exemptions, assets of the bankrupt are collected and paid to creditors.

Bar Chart

A graphical tool that helps visualize a frequency distribution, used with discrete data.

Base Country (Or Home Country)

In international compensation, this is the country upon which an expatriate's compensation is based. It is usually the expatriate's home country or the country in which the employee's headquarters is located.

Base Pay

The expatriate's stated home country salary before any addition of differentials, allowances or incentives for Foreign Service or required contributions. Base pay is the salary that would be paid for the position on the basis of its level.

Base Payroll

Determined by the sum of annual salaries and or wages (base rates) paid at the opening of business on the first day of the plan year or last day of prior year, e.g., Dec. 31, before any increase.

Base Rate

The hourly amount paid for a job performed. This does not include shift differentials, benefits, overtime, incentive premiums or any other pay element other than the base rate. See also base wage rate.

Base Salary Or Wage

Base Salary or Wage is the basic rate of pay (excluding overtime pay).

Base Wage Rate (Or Base Rate)

The hourly rate or salary paid for a job performed. This does not include shift differentials, benefits, overtime, incentive premiums, or any other pay element other than the base rate.

Basic Death Benefit

The death benefit according to the terms of the original, basic contract of a life insurance policy. The basic death benefit does not include the benefit for any supplementary riders, such as an accidental death benefit (ADB) rider. For policies whose death benefit remains constant, the basic death benefit is equivalent to the face amount. Compare to death benefit and policy proceeds.

Basic Earnings Per Share (EPS)

The net earnings available to common shareholders of an organization divided by the weighted average of total shares outstanding. No consideration is given in this calculation for common stock equivalents such as stock options.

Basic Mortality Table

A mortality table without a safety margin. Also called a basic experience table. See also mortality table and safety margin.

Basic Plan With Major Medical

A medical insurance plan that provides for coverage of almost all hospital and surgical charges and some other medical expenses, up to a specified amount without a deductible.

Basic Services

Under dental insurance, dental services, such as fillings, periodontics and oral surgery, which are often covered at 80 percent of their reasonable and customary charges.

Basket Clause

Several definitions: 1) From an investment point of view, this is a provision that allows insurance companies to invest a small percentage of their assets generally without regard to statutory restrictions. (2) From an accounting point of view, this is a clause that permits life, and health insurers to hold a specified amount of their assets as nonauthorized assets, which are not restricted in the same way as authorized assets.

Behavior Based Appraisal

Any performance assessment system that concentrates on the behaviors of those being rated (such as behavioral expectation scales, behaviorally anchored rating scales, or behavioral observation scales).

Below Market Rate Employee Loans

A compensation-related loan is any loan bearing a below-market interest rate made in connection with performance of services directly or indirectly between an employer and employee.

Benchmark Job

A job that is commonly found and defined, used to make pay comparisons, either within the organization or to comparable jobs outside the organization. Pay data for these jobs are readily available in published surveys.

Benchmark Job Data

Market and company data for surveyed jobs.

Benchmarking

The process by which an organization seeks to identify top performing organizations and analyzes their strategies, policies and practices for the purpose of learning some or all of them.

Beneficiary

The person, other than the plan member, designated to receive the benefit resulting from the death of an employee, such as the proceeds of a life or accident insurance policy or benefits from a pension plan. See also CONTINGENT BENEFICIARY, IRREVOCABLE BENEFICIARY, PRIMARY BENEFICIARY, and REVOCABLE BENEFICIARY.

Beneficiary Declaration

Peculiar to Canada, an insurance policy beneficiary designation that is made in a separate written document after the insurance policy has been issued.

Benefit

The amount of money paid when an insurance claim is approved. Also known as the policy benefit.

Benefit Of Survivorship

A term used to describe the fact that annuity payments will be made as long as the designated recipient is alive at the time the payment is due. This concept is used in the calculation of amounts due under life insurance settlement options.

Benefit Plans - Health Care

The two types of health care benefit programs are indemnity programs and health maintenance organizations.

Benefit Plans - Retirement

A Retirement Plan is an agreement on the part of management to provide a vehicle for the retirement income needs of employees. Such plans may be qualified or non-qualified for tax purposes.

Benefit Reductions

A cost-containment measure utilized by an organization to reduce its expenses through reduction in benefit coverage (e.g. increase in medical plan deductibles, increase in employee contributions, reduction in annual limits in dental plans).

Benefit Schedule

Under an organization's insurance plan, this is a table or schedule that specifies the amount of coverage, provided for each class of insured. Insureds are often classified with reference either to earnings or to rank or position. Also called a schedule of benefits.

Benefit Statements

Each year employees must be given an individual benefit statement that explains accrued benefits to date and vesting status.

Benefits Packages

The total value of all non-cash compensation elements, including but not limited to income protection, health coverage, retirement savings, vacation and income supplements for employees, provided in whole or in part by employer payments.

Bennett Amendment

An amendment to the Civil Rights Act of 1964 that states that it shall not be unlawful practice to differentiate compensation on the basis of sex if such differentiation is authorized by the Equal Pay Act.

Bereavement Leave

Bereavement Leave or funeral leave provides time off for workers following the death of a family member. Policy on such leave defines the number of days and defines who is considered to be a relative under the policy. Some companies allow employees to take bereavement leave as unpaid leave, sick leave or annual leave.

Best Earnings Plan

A benefit plan that calculates a recipient's retirement benefit based on the period during which the employee earned his or her highest income.

Beta

A mathematical measure of the volatility of a particular stock, mutual fund, and/or portfolio in comparison with the entire market. Specifically, it measures the stock, fund or portfolio performance during the last 5 years. A beta of 1.0 indicates that an asset closely followed the market; a beta greater than 1.0 indicates a greater volatility than the market - a beta of less than 1.0 indicates that the asset was less volatile than the market.

Bilingual Differential

Bilingual Differential is a cash differential that is paid in addition to base salary for language skills that are required in a job. The differential provides a constant reminder to the employee that he or she is compensated for this ability in addition to performance of the job.

Bi-Modal

A distribution with two modes.

Binding Premium Receipt

A type of initial premium receipt that makes insurance coverage effective immediately, but only until the insurance company either rejects the application or approves it and issues a policy.

Binomial Option Pricing Model

A mathematical formula that determines a theoretical value for an option on stock subject to trade on an option exchange. May be used by a company that chooses to apply the FAS123 rule to stock granted to employees.

Birthday Rule

A provision that specifies the manner in which benefits for dependent children are to be coordinated between two insurance plans. According to the birthday rule, benefits for dependent children will be paid by the plan of the parent whose birthday falls earlier in the year.

Black-Scholes Model

A mathematical model originally derived by economists Myron Scholes, Robert Merton, and Fischer Black to value stock options traded on public markets. The Black-Scholes Formula provides a way to determine the worth of a CALL OPTION at any given time. To find out how to use this formula, see DLC Course 22: Black-Scholes Valuations.

Blended Rates

Several definitions: 1) Organization mortality rates that are based, in part, on a group's own experience and in part on manual rates. Blended rates are used to determine the appropriate organization insurance premium rates for intermediate-size groups. See also experience rating and manual rates. (2) A rate offered by a lender, which is somewhere between a previous rate and a new loan rate.

BLS

U.S. Government's Bureau of Labor Statistics.

Blue Cross Plan

A hospital expense insurance plan offered by a regionally-operated health care provider affiliated with a large national nonprofit health care organization. This plan typically provides benefits on a 'service-type' basis.

Blue Shield Plan

A physician expense insurance plan offered by a regionally operated health care provider affiliated with a large national nonprofit health care organization. This plan typically provides benefits on a 'service-type' basis.

Bonafide Occupational Qualification (BFOG)

Typically refers to a valid job requirement, i.e., a knowledge, skill or an ability level that is required for competent job performance. Origin of the term BFOQ is found in Title VII of the Civil Rights Act (1964).

Bond

A debt instrument issued for a period of more than one year with the intent of raising capital by borrowing. The Federal government, states, cities, corporations, and other types of institutions sell bonds. A bond is typically a promise to repay the principal loan along with interest on a specified date of maturity.

Bonus (Pay Plans)

Plans that award cash or other items of value, such as stock or stock options, based on accomplishments achieved. Incentive plans are 'forward' looking; bonus plans are 'backward' looking.

Bonus / Bonuses

Bonuses are lump-sum awards to employees based on performance of employees. Bonuses are usually paid on a periodic basis, i.e., quarterly, semi-annually or annually. Payments may take the form of cash, share options, shares or other.

Bonus Eligible

Refers to groups or classes of employees eligible to participate in a bonus program.

Bonus Guarantee

A payment in addition to base salary that is made regardless of performance, e.g., an incentive award that is guaranteed, usually to a new hire or to a newly promoted person. It is usually nonrecoverable by the company.

Bonus Progressivity

An employee rewards plan that increases the incentive as the employee performance exceeds predetermined degrees of performance. See PROGRESSIVITY OF INCENTIVES.

Book Unit Award Plan

A type of long-term incentive plan, whereby an employee is awarded stock valued at the book value per share. In a book value appreciation plan an increase in the book value of the stock accrues to the benefit of the employee.

Book Value (BV)

Total shareholders' equity divided by the number of common shares outstanding. See NET WORTH. Book value is sometimes used in incentive plans in privately owned companies where the fair market value of shares is not readily known.

Book Value Purchase Plans

An incentive program in which employees purchase shares of their organization at book value. They subsequently can sell the shares back to the organization at the then book value.

Bottom Line

An individuals or company's profit after taking into consideration all other expenses and income and taxes.

Branch Manager

The individual typically in charge of a field office of an insurance company. This individual uses the BRANCH OFFICE DISTRIBUTION SYSTEM. Also called a general manager.

Branch Office Distribution System

A common system for selling individual life insurance. Under this system, the soliciting agents who work out of a branch office are under contract to the insurance company, not to the branch manager. The agents receive commissions directly from the insurance company. The branch office manager, supervisors, and clerical personnel in the field office are employees of the insurance company; and these employees are subject to the same types of controls normally exercised by an employer. See also AGENCY SYSTEM and BRANCH MANAGER.

Breach Of Duties

A breach is a violation or infraction, as of a law, a legal obligation, or a promise. When applied to an employee, it is grounds for dismissal

Break In Service

The length of time between the date on which an employee leaves an organization and the date on which the employee resumes working for that firm. For pension and employee benefit plan purposes in the United States, a plan participant cannot be deprived of benefits that accumulate before a break in service, unless the break is longer than (1) five years or (2) the amount of time that the participant has been employed when the break commences.

Break In Service Year (Erisa Pension-Plan Standards)

An anniversary year during which a plan participant does not complete more than 500 hours of service and earns no pension benefits. If a non-vested employee incurs five or more consecutive break years, that employee may lose all the time towards vesting under the plan.

Bridge Loan

This is a loan typically secured by your current home, which is usually listed for sale. The bridge loan is used to finance the purchase of the second home. The homeowner usually has a year within which to sell or rent the first home and to pay off the loan with the proceeds.

Bridging Supplement

Peculiar to Canada, a supplemental pension provided to a pension plan participant who retires before age 65. The bridging supplement is generally used to integrate private pension plans with public pension plans. If a pension plan participant retires before age 65, the plan sponsor can provide a bridging supplement until the retiree turns 65 and begins to receive payments from the public pension plans. The combined benefit payment that the participant receives remains level and is the same as the participant would have received had he or she waited until the age 65 before beginning to receive benefits. The sponsor is providing an amount in addition to the basic pension payment. Known also as a bridging benefit.

Broadbanding

A pay structure that consolidates a large number of pay grades and salary ranges into much fewer broad bands with relatively wide salary ranges. These ranges typically have 100 percent or more differences between minimum and maximum. (e.g. $25,000 to $50,000)

Broker

A person or firm who, for a fee or commission, acts as an intermediary between a buyer and seller. Usually a license is required (see also floor broker, agency).

Broker Dealer

Other than a bank, any individual or firm that is in the business of buying and selling securities for itself and others. Called an agent or broker when buying securities and a principal or dealer when selling them. The SEC requires that broker/dealers not only register with the SEC but also with the states in which they conduct business.

Brokerage Distribution System

A distribution system relying on commissioned agents, called brokers, who sell the products of more than one insurance company.

Brokerage Manager

A salaried insurance company employee or an independent agent whose responsibility is to appoint brokers on behalf of the company and to encourage brokers to sell the products of a particular insurance company.

Brokerage Shop

An agency operated by an independent general agent who is under contract to a number of insurance companies. Also known as a brokerage general agency.

Brother-Sister Arrangement

When a third corporation, group, or person owns two or more corporations this arrangement is typically known as 'brother - sister.'

Budget

An itemized plan of an individual or company's income and expenses expected for a period of time to come.

Bulletin Boards

Bulletin Boards are useful and required methods of posting information that are of general public interest, such as information informing employees of Equal employment policies, safety requirements, and other government regulations.

Bundled Insurance Product

An insurance product in which the mortality, investment, and expense factors are all used to determine premium rates. Cash values are not separately identified in the policy. Usually whole life insurance is an example of a bundled insurance product. See and contrast with UNBUNDLED INSURANCE PRODUCT.

Bureau Of Labor Statistics (BLS)

This is the United States Federal Government's major fact-finding agency in the field of labor economics and statistics. Its responsibilities include finding data on wage, national pay, and industry surveys, such as the National Compensation Survey (NCS) and the Occupational Employment Survey (OES).

Business Continuation Insurance

An insurance type for closely held businesses, it is designed to provide funds to enable the remaining partners in a business, or the remaining stockholders in a closely-held corporation, to purchase the business interest of a deceased or disabled partner or stockholder. Compare with PARTNERSHIP INSURANCE and STOCK REEPURCHASE INSURANCE.

Business Expenses

Several definitions: 1) This is the cost of operating a business. It is a deductible for federal income tax purposes. 2) Where the employee is concerned, a business expense is that expense for which the employee is reimbursed and which is not included in his/her pay.

Business Insurance

This type of insurance is intended to serve the insurance coverage needs of a business, as opposed to that of an individual.

Business Travel Accident Insurance

An insurance plan that covers both employees and the employer should an accident occur while the employee is traveling on company business.

Business Travel Accident Plan

An insurance plan that covers both employees and the employer should an accident occur while the employee is travelling on company business.

Buyer's Guide

In the United States many states require that insurance companies make this publication available to an applicant for life insurance. The Buyer's Guide enables the applicant to make a better-informed choice among policies.

Buying Power

The inverse of cost of living. COST OF LIVING is the cost of purchasing goods and services, as determined by the demand and supply of goods, services, and property. For example, if the cost of living is 10% higher in an area, the buying power is approximately 10% less in that area.