Total Rewards – Glossary of Terms

Glossary of Terms
Total Rewards

Term Definition

Annual Incentive/Bonus Payment for the achievement of predefined performance criteria, typically
related to organizational and employee.
Compa-ratio A measure of the competitiveness of an employee’s pay, calculated by dividing
their current base pay by the midpoint or market reference point for their job.

Compensation Philosophy*
Market competitiveness
Pay equity
A statement that describes the guiding principles behind an organizations’ pay
practices and how pay practices support organizational strategy. It explains
why we offer what we offer. Philosophies typically cover the types of things
shown here:
In terms of how plans should compare to the market rate for jobs paid
externally, and how much flexibility there is on that.
In terms of providing comparable pay for comparable work, which is
increasingly important given the diversity of the workforce.

Compensation Planner Employee that is responsible for planning salary increases for merit and
market/pay adjustments; bonus awards, LTI awards (RSUs) and promotions for
the groups under his/her management.

Long-Term Incentives Add-on compensation to base pay designed to reward performance and
productivity based on the achievement of specific long-term performance
goals. Awards are provided through Restricted Stock Units (RSU’s).
Market Rate The value of a job in the external labor market.

Pay for Performance A compensation strategy that rewards employees with salary increases, short-
and/or long-term incentives based on the achievement of performance goals.
Typically, high performers are eligible for larger rewards.

Restricted Stock Units (RSU) Actual stock shares that vest through continued employment with the company
(at whatever the going price is when the shares vest). An RSU is converted to
a share of common stock upon vesting without you having to buy it or take any
other action.
Salary Increase An increase in the base salary of a worker, usually given on the basis of certain
criteria including (e.g., individual performance or market/internal equity).
Vesting Period The amount of time over which an employee gains the rights to a long-term
incentive grant. The vesting period at Align is four years.

* Align Technology Inc's philosophy is to reward pay increases based on merit and contributions.

For internal use only – Do not distribute outside of Align