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.

Rabbi Trust

This nonqualified arrangement, allows the employer to set money aside expressly to pay for excess pensions or deferred pay. Employers do not take a tax deduction, and the beneficiaries do not pay tax on contributions to the trusts until such time that they start receiving their money. Although funds are subject to employer's creditors, they are not accessible to current and future management.

Raise

An increase in wages or salary.

Random Sampling

A method under which sections of a population are drawn utilizing a procedure by which every member of the population has an equal opportunity to be chosen.

Range

Several definitions: 1) The difference between the maximum value and minimum value, 2) In reference to a pay grade, the amount that the maximum pay exceeds the minimum pay.

Range Penetration

An individual's pay compared to the complete pay range. Range Penetration = (Pay - Range Minimum)/(Range Maximum -Range Minimum).

Range Spread

Usually used to determine individual employee pay, this term refers to range of rates, from the minimum to the maximum for a particular class or grade of employees.

Ranking Method Of Job Evaluation

A job comparison that results in the ranking of jobs into a hierarchy beginning at the highest and ending at the lowest.

Rate

The money rate paid to an employee per hour.

Rate Making

The actuarial calculation of rates for insurance products.

Rate Of Return Method

A technique that compares the price for life insurance when the important figure is the annual percentage rate that represents the rate of return.

Rate Range

Usually used to determine individual employee pay, this term refers to range of rates, from the minimum to the maximum for a particular class or grade of employees.

Rated Policy

An insurance policy that covers a person classified as a greater than average risk of loss. The policy's premium rate may be higher than the rate for a standard policy or the policy is issued with special limitations or exclusions or both.

Rating Classes

Three various techniques that insurance companies use for mortality assumptions to determine group life premiums. The methods are rating are: experience rates, manually rated and blended.

Rating Manual

A manual used by underwriters, for determining premium, that includes suggested ratings and very little background for the impairments listed.

Ratio

A value that is divided by another value.

Ratio Measurements

Measurements that show how much or the amount of a quality or an item is being measured.

Real Wages

Earnings that are deflated by a price index. Utilized as an index of the purchasing strength of the dollars received from salary.

Reasonable And Customary Charge

The typical charge made by providers of similar ability for a similar service in a particular geographic area.

Reasonable Compensation

Reasonable compensation is a term used by the IRS to define the compensation amount that is a deductible business expense. The issue comes up because stockholder-employees can alter their wages and income distributions to avoid taxes. Under IRC 162 (a), wages are a deductible business expense to the extent wages are reasonable. In an S Corporation, under-payment of wages occurs in order to maximize pass-through income and avoid payment of FICA and Medicare contributions. In a C corporation, wages are maximized and dividends eliminated or minimized to avoid the double taxation of dividends.

Rebating

A sales practice in insurance sales that is typically forbidden. Rebating occurs when a sales agent offers the applicant an incentive to buy the policy. The rebate is typically a percentage or a dollar figure of the agent's commission.

Rebuttable Presumption of Reasonableness

The rebuttable presumption of reasonableness is a procedure that, once properly invoked, shifts the burden of proof regarding unreasonable compensation to the IRS for purposes of intermediate sanctions excise-tax penalties. Simply put, the presumption is established when: (1) the board or authorized committee, free of any conflict with the executive in question, determines the compensation arrangement prior to effectuating the arrangement, (2) the board or committee uses appropriate compensation comparability data in arriving at its decision and (3) the board or committee properly documents its decision in a timely manner.

The IRS feels so strongly about the importance of these three factors, that documentation and disclosure of each factor is now part of the application used to obtain public charity status. Each public charity would benefit from following these factors and invoking the presumption whenever possible. This is especially true now that the IRS is more active in cracking down on excessive compensation arrangements within public charities as part of its executive compensation initiative.

Reclassification

Moving a job to a higher or lower range in the companies hierarchy because of a change in the salaries in the labor market.

Recognition Program

A process in which employees efforts and successes are recognized.

Recording Method

The process of changing the beneficiary in a life insurance policy in which the policyowner provides a written statement to the insurance company.

Recovery Benefit

A residual or partial disability benefit that is to be paid upon satisfaction of the company's elimination period, and the employee experiences another loss of earnings due to a previous partial or total disability.

Recruitment Bonuses

Reward payments that are given to new employees to entice them to accept the job offer. The rewards may be paid at the time the employee begins the employment, or over a pre-agreed upon period of time.

Red Circle Rate

An employee pay that is higher than the already determined maximum that was assigned to the job. Increases in pay are not usually given unless the range maximum exceeds the employee pay rate.

Re-Enlistment Bonus

A monetary incentive paid to an expatriate to stay on the current assignment longer than initially expected.

Referral Bonus

Payments that are given to existing employees who recruit new employees as long as the new employee remains employed for a specific period of time, or for a new client that produces new revenue for the organization.

Refund Annuity

A life insurance annuity that specifies that if nothing else, the purchase price will be paid in benefits.

Regional Director Of Agencies (RDA)

An employee at the insurance company that is responsible for assigning PPGAs for company representation.

Registered Pension Plan

A pension plan in Canada that meets the Canadian Minister's National Revenue requirements.

Registered Reinsurer

A reinsuer in Canada that is licensed to receive reinsurance in certain jurisdictions.

Registered Representative

An individual who has passed the series 7 and series 63 exams and then sells securities and has the legal power of an agent. This representative will typically work for a brokerage firm licensed by the NASD, NYSE and SEC.

Registered Retirement Plan

A pension plan in Quebec that has been approved and registered by the Quebec Department of Revenue.

Registered Retirement Savings Plan (RRSP)

A policy in Canada that lets Canadian citizens to create tax-sheltered accounts to accrue money for retirement.

Regressive Incentive

A decreasing incentive rate as performance surpasses previously determined levels.

Regular Rate Of Pay

The total compensation that is utilized to determine the overtime rates according the Fair Labor Standards Act. The regular rate for an hourly employee is the hourly pay rate plus some other forms of compensation received by the employee.

Reinforcement Theory

A behavior theory that hypothesizes that employees will act in ways that provide rewards as opposed to punishment.

Reinstatement

A life insurance company restoring the life insurance benefits of a policy that had been terminated due to nonpayment of premium.

Reinstatement Provision

A provision in a life insurance policy that states the terms the policyowner must comply with in order for the insurance company to reinstate a terminated policy due to nonpayment of premiums.

Reinsurance

A method utilized by insurance companies to distribute insurance risk when one organization has accepted part of the risk for insurance underwritten by a different organization to share in the premium.

Reinsurer

An insurance carrier that provides reinsurance policies to other carriers.

Relation Of Earnings To Insurance Clause

A part of some individual disability policies that places a limitation on the benefit that an insurance company pay if the total disability benefit from all insurers is more than the insured's earnings.

Relative Value Schedule

A surgical procedure schedule that describes the costs for surgical procedures in units as opposed to dollars.

Reliability

The ability of a device or human to be free of error when taking measurements.

Religious Discrimination

The failure of an employer to make a reasonable accommodation to allow the employee or employees to observe a religious holiday or practice, except in the event that the employees absence would create hardship on the employers business.

Relocation Premium

A lump sum of money given to an expatriate to help with the unusually expensive costs associated with relocation.

Remembrance Funds

A fund that provides items such as obituary notices, flowers or small gifts in the event of illness, termination, hospitalization, or death for the employee or for a member of the employees family. This fund is exempt from reporting for ERISA purposes.

Remote-Site-Allowance

A specific type of payment that is given to an employee if a work site is difficult to reach or isolated.

Remuneration

The sum of the financial and nonfinancial value to the employee of all the elements in the employment package.

Remuneration Loss Replacement

Remuneration Loss Replacement Plans cover employees from wage loss due to: 1. sickness and injury, 2. weekly indemnity, 3. short-term disability, 4. long-term disability. The employers contributions to these plans are not a taxable benefit to the employee. However, receiving benefits under the plan is a taxable benefit to the employee.

Remuneration Strategy, Philosophy, Policy

The characteristics that assist in the administration and implementation of a remuneration plan at a company.

Renewable Term Insurance

A kind of term insurance that includes a renewal clause that at the end of the term the insured can renew the coverage without going through evidence of insurability.

Renewal Commission

Commissions that are paid to an agent for a certain period of years, typically nine, after the initial policy year. The renewal commission rates are typically lower after the first year, and commission is only paid on the policies that remain in force.

Renewal Premiums

Premiums that are payable after the first premium payment.

Renewal Provision

Several definitions: 1) A stipulation in an individual health policy that discussed the conditions upon which the insurer will not renew coverage, can cancel coverage or can increase the premium, 2) An individual life insurance policy stipulation that allows the policyowner to continue coverage at the end of the term without going through evidence of insurability.

Renter's Buying Power

The salary equivalent after taking into account the cost of living in the region.

Replacement

The giving up of an insurance policy or a part thereof in order to purchase another.

Reportable Event

Several definitions: 1) This is a term used in the United States and it means an event indicating that a pension plan may be deteriorating financially, to the extent that the plan could be terminated. Events such as those have to be reported to the Pension Benefit Guaranty Corporation (PBGC). (2) An occurrence, the result of which is that a defined-contribution is materially changed or that a defined-benefit plan is changed materially. This event may be a change of formula, an acquisition or a divestiture.

Representation

This is a statement or declaration by an individual making an insurance application, upon which the insurance company bases its decision.

Required Reserve

Peculiar to Canada, this is a reserve, which the insurer is obligated to maintain by the department of insurance in the province in which the insurer operates and or by a foreign jurisdiction, if that is where the insurance company operates.

Rescission

A remedy in equity under which an insurance company may void an insurance contract or have it declared null and void. A rescission is typically granted in a situation where there has been a misrepresentation, deemed to be material, on the insurance application. See Representation.

Reservation Wage

People make decisions, not by evaluating all alternatives but by developing a model in their head of an acceptable solution. Doing this creates a situation in which economists state that wages are “noncompensatory.” This means that there is some wage below which job seekers will NOT accept a particular job offer. This is the reservation wage. Other factors will not substitute for this amount. This wage may or may not be related to the going wage.

Reserve

Several definitions: 1) Usually, this is an account, which establishes the amount needed to pay future claims. (2) If used in terms of Life Insurance, 'Reserve' refers to policy reserve. (3) In terms of investments, 'reserve' includes savings, social security payments, investment portfolios and insurance. See also policy reserve.

Reserve For Future Contingent Benefits

In terms of health insurance, this is an amount established as reserve for claims, which though may already have been incurred may be dependent on the happening of a future event, which may be beyond the control of the insurance company. May also be for deferred maternity benefits.

Reserve Strengthening

This is the process whereby additional policy reserves are set up, using a formula determined in a disability income policy. The percentage of income lost is usually what determines the amount of the benefit. See partial disability benefit.

Resisted Claim

This term is used to describe a claim, which the insurance company has refused to pay but which it may have to pay at a later date.

Resource

An Internet term, which may be used to refer to a wide variety of things (e.g., a Web page, part of a Web page, computer devices, people, or other entities).

Resource Description Framework (RDF)

A computer framework that is easily understood by computers, that is utilized to express what terms and concepts mean.

Responsibility

A duty or set of duties describing the main objective or the reason for a job existing.

Rest-And-Recreation Leave

Considered to be distinct and separate from regular vacation and or home leave, this is time off, which is granted to expatriates from time to time especially to those working in areas where living conditions are very difficult.

Restricted Stock

This is stock given to an employee or which is sold to an employee at a discount. The employee is typically prevented from selling or otherwise disposing of the stock for a specified period. The employee, owns any dividends deriving there from but if he or she should leave the company before the period of restriction, then he or she forfeits the stock.

Restructuring

Describes any number of methods of reorganizing a company resulting in dramatic change within the company. Benefits are usually short term but may be long term and the main objective is typically to discourage take-over bids.

Result Clause

This clause, when found in an employment contract, is there to exclude benefits from being paid on losses caused by acts related to war. May also be known as war-hazard exclusion.

Retained Asset Account (RAA)

Established by insurance companies for the beneficiaries of life insurance, this is a money market checking account, which bears interest.

Retention

Several definitions: 1) In terms of reinsurance, this describes the risk that the insurance company/the ceding company keeps. (2) In terms of a company's insurance agreement, this is the part of the premium, which the company keeps for the purpose of covering expenses, charges, risks and contribution to the surplus.

Retention Bonus

Retention Bonus is typically used for positions that experience high levels of turnover, such as nurses. The Retention Bonus is paid in a lump sum at the end of a specified period of employment such as 6 months or one year.

Retention Limit

This is the limit of risk that an insurance company will assume, without ceding a part of the risk to another company, on any individual.

Retired Lives Reserve

A fund set up by some employers into which they pay monies on the behalf of employees, throughout the period of their employment, for the purpose of providing life insurance to the employees upon their retirement.

Retiree Benefit Reserves

In order to protect retirement benefits and to reduce non-funded liabilities of the company, many companies create reserves for payment of future health and insurance obligations.

Retro Premium

This is an amount agreed upon by the insurance company and the owner of the policy at the beginning of the paying period but which is to be paid at the end, if and only if the insured party's claim experience calls for it.

Retroactive Disability Benefit

Benefits payable at the on-set of disability but whose first payment does not occur until after a specified elimination period.

Retrospective Premium Arrangement

An insurance arrangement where, the insurance company's margin / cut is waived from the premium but the insurance company still maintains the right to 'call' the margin up to a certain percentage, depending on the insured's claim experience.

Retrospective Review

An aspect of a utilization review system, which provides the insurance company with reports, periodically, on the practice patterns of physicians and the average lengths of hospital stay.

Retrospective-Rating Arrangement

A type of funding for insurance agreements, in which the insurance company collects a percentage of the due premium from the insured party at the beginning of the payment period and the remainder is collected at the end, unless the insured party's claim experience is better than anticipated.

Return On Assets (ROA)

This term describes the ratio of net income to total assets of an organization. This is a major financial measure, which is sometimes used as a determining factor in the establishment of incentive plans.

Return On Capital Employed (ROC, ROTC, ROCE)

Represents a companies earnings before interest and tax divided by capital employed plus short term borrowings minus total intangibles. ROCE takes into account all the assets employed in the course of business including loans and measures the return the company made on them. If a company has a low ROCE, it is using its resources inefficiently, even if it has a high profit margin.

Return On Equity (ROE)

Frequently used as an incentive plan measure, this is a term employed to describe returns due to shareholder by aligning profits to the equity of stockholders.

Return On Investments (ROI)

This is a term employed to ascertain the earning power of assets. The ratio serves to measure the profitability of a company and therefore, is a good indicator of the effectiveness of management.

Return On Net Assets (RONA)

This is a way of measuring the overall earning power and or profitability of a company. It is the ration of the total assets (minus liabilities) to the net income. May be used as a measure for executive incentive plans. Compare with ROC and ROTC.

Return On Sales (ROS)

Sometimes used to establish executive incentive plans, this is an important financial measure, which represents the ratio of net income and sales.

Return On Selected (Or Employed) Assets (ROSA, ROEA)

This is a term employed to describe the ratio of the net earnings of a company to the assets, which are relevant to those earnings. This is an important measure, which is sometimes a criterion in incentive plans for the executives of a company.

Return On Shareholders' Equity (ROSE)

Frequently used as an incentive plan measure, this is a term employed to describe returns due to shareholder by aligning profits to the equity of stockholders.

Revenue

Money, which is generated by a company form the sale of their services or goods.

Revocable Beneficiary

A term employed to describe a beneficiary to a life policy whose rights as beneficiary does not vest for so long as the insured party is alive and who may be cancelled at any time (during the life time of the party insured).

Revocable Trust

A revocable trust is one that may be cancelled at any time by either the grantor or by another person. Unlike the irrevocable trust, estate taxes are not avoidable with the revocable trust. See revisionary trust and vivos trust.

Rewards System

As more companies look for better ways to attract, retain and motivate good employees, in a competitive labor market, the pressure is growing to get rid of the old methods of compensation (which focuses on money and nothing else) and for new methods to be developed (which would be varied and which would encompass more). As much as money is important, it has been shown that both job seekers and employees value advancement possibilities, emotional rewards and learning and rank those highly on lists of today's best companies attribute list. The reward system is a compensation method/package, which includes all of those attributes.

Rider

Also known as an 'endorsement', this is an amendment made to an insurance contract, which then becomes part of the agreement by expanding or by limiting the existing terms.

Right Of Survivorship

A clause, which is sometimes included in transfers / assignments of life policies, providing that, should an assignee die, his or her survivors are entitled to his or her part of the transfer / assignment.

Rightsizing

This is the term used to describe the elimination of non-essential / redundant positions in order to reduce the size of the work force to the smallest possible size that it can be without negatively affect operations. The employees who are not laid off at the end of this process are known as residual employees.

Risk Class

In organizational insurance, these are groups of insureds that represent ostensibly similar risk, in the eyes of the insurance company. The most common classes of risk are, standard, substandard, preferred, non-smoker and uninsurable.

Risk In Insurance

This is the fact that the occurrence of loss of or lack there of is uncertain.

Risk Premium

This is a term used to describe the reward for accepting an investment considered to be risky (an investment with greater risk than the U.S. Treasury Securities). See premium, risk premium and Capital Asset Pricing Model.

Risk-Free Rate Of Return

U.S. Treasury Securities are considered to be risk free and so this term would be used to describe the yield / gain on U.S. Treasury Securities. A risk-free rate pf return is frequently used to determine the cost of capital.

Rollover

This is the process of re-investing distribution from one qualified plan of a prior employer to another or investing it in an individual retirement account (IRA). Roll-overs are tax -free transfers of account balances.

Room and Board

To receive room and board or transportation benefits tax free the employee must: (1) be on temporary assignment, (2) must have a permanent residence elsewhere, (3) this residence must be available for his/her use, (4) the work site be too far to return to nightly, and (5) must be on assignment for over 36 hours.

Roth Individual Retirement

Beginning in 1998, taxpayers can make nondeductible contributions of up to $2000 a year into a new Roth Individual Retirement Account

Rucker Share Of Production Plan

A program whereby certain cost savings resulting from an employee's effort will be shared with all employees.