Employee Benefits & Compensation Terms

A 10b5-1 plan is a preset schedule that lets company insiders buy or sell their own stock automatically over time, providing a legal defense against accusations of trading on inside information.

A 409A valuation is an independent appraisal of a private company's stock value, used to set a fair strike price for employee stock options and stay compliant with IRS rules.

Accidental death and dismemberment insurance pays a benefit if you die or lose a limb, sight, or similar function specifically because of an accident.

Adoption assistance is an employer benefit that helps cover the costs of adopting a child, with a portion potentially excluded from the employee's taxable income up to IRS limits.

The alternative minimum tax (AMT) is a parallel tax calculation that limits certain deductions and preferences to ensure higher-income taxpayers pay at least a minimum amount — you pay whichever result is higher, regular tax or AMT.

A workplace benefits audit is a review of all the benefits your employer offers to make sure you are using the ones that help you, since valuable perks often go unclaimed.

The bargain element is the difference between the market value of a stock at exercise and the lower price you paid for it under an option — an amount that often has tax consequences.

Some people, especially in the Barista FIRE approach, take a part-time job mainly to qualify for employer health insurance and other benefits while living largely off their savings.

Base salary is the fixed amount an employer pays you for your work, before bonuses, overtime, commissions, or benefits are added.

Benefits enrollment is the period when employees choose their workplace benefits, such as health insurance, retirement contributions, and other coverage, for the coming year.

A blackout period is a window during which company insiders are barred from trading their employer's stock, typically around earnings releases or other times they may hold non-public information.

The way employers withhold income tax from bonus pay, often at a flat supplemental rate that can differ from the tax ultimately owed on that money.

A cafeteria plan is an employer benefit program that lets employees choose among options and pay for certain benefits with pre-tax dollars, lowering their taxable income.

Commission income is pay based on results, such as a percentage of sales you close, so your earnings rise and fall with your performance rather than staying fixed.

Commuter benefits are an employer program that lets employees set aside pre-tax income to pay for qualifying transit or parking costs, reducing their taxes on commuting expenses.

A concentrated stock position is when a large share of your wealth is tied up in a single company's stock, which increases risk because your finances rise and fall with that one investment.

Dental insurance helps pay for routine cleanings, exams, and dental procedures, usually up to an annual coverage cap.

A disqualifying disposition is a sale of shares from incentive stock options or an employee stock purchase plan before the required holding periods are met, causing part of the gain to be taxed as ordinary income.

Domestic partner benefits are employer perks, such as health coverage, extended to an employee's unmarried partner, though their value may be treated as taxable income unlike spousal benefits.

Double-trigger vesting is a rule requiring two events to occur — commonly a company sale plus the employee's job loss — before certain equity awards vest and become payable.

An employee assistance program is a confidential employer benefit that provides free short-term counseling and referrals for personal, family, legal, or financial concerns.

An employee stock ownership plan (ESOP) is a qualified retirement plan that invests primarily in the employer's own stock, giving workers an ownership stake in the company they work for.

An employer donation match is a benefit in which a company gives money to a charity to match the donations its employees make.

Employer educational assistance is a workplace benefit in which a company helps pay for an employee's tuition or student loans, often up to an annual tax-free limit set by the IRS.

Startup equity is an ownership stake in a young company, often granted to early employees as stock or options in place of higher salary, in hopes the shares grow valuable.

An ESPP discount is the reduced price at which an employee stock purchase plan lets you buy company shares, commonly a set percentage below the market value, which can make the plan a valuable benefit.

An ESPP lookback provision is a feature of some employee stock purchase plans that sets your purchase price based on the stock value at either the start or end of the offering period, whichever is lower.

The exempt-versus-non-exempt distinction classifies workers under labor law — non-exempt employees must be paid overtime for extra hours, while exempt employees generally are not.

The Family and Medical Leave Act is a federal law that lets eligible employees take unpaid, job-protected leave for certain family and medical reasons, such as a serious illness or a new child.

Garden leave is a period during which a departing employee remains on the payroll but stays away from work, often to keep them from joining a competitor while their access winds down.

Golden handcuffs are financial incentives, such as unvested stock or deferred bonuses, designed to discourage an employee from leaving a job by making departure costly.

Gross pay is your earnings before deductions, while net pay is what actually reaches you after taxes, benefits, and other withholdings are subtracted — the amount you take home.

Group disability insurance is coverage an employer buys for its workforce, replacing a set percentage of pay after a waiting period. It costs far less than an individual policy but caps the benefit, often excludes bonus and commission income, and ends when the job does.

A group legal plan is an employer benefit that gives employees access to legal services, such as help with wills or contracts, for a low premium or at reduced cost.

A health reimbursement arrangement is an employer-funded plan that repays employees, tax-free, for qualified medical expenses or insurance premiums up to a set amount.

Imputed income is the value of a non-cash benefit — like employer-paid life insurance above a set coverage amount or personal use of a company car — that the IRS treats as taxable wages even though no money changes hands.

Job hopping is the pattern of changing employers frequently, a strategy some workers use to raise their pay faster, though it can carry trade-offs for benefits and stability.

A limited purpose FSA is a flexible spending account restricted to dental and vision expenses, letting you keep it alongside a health savings account.

A non-compete agreement is a contract that limits an employee from working for a competitor or starting a rival business for a set time after leaving, though its enforceability varies by state.

The overtime deduction is a temporary federal deduction created by the 2025 tax law for the extra "half" portion of time-and-a-half overtime pay, available up to an annual cap and phased out at higher incomes.

Overtime pay is the higher rate, commonly one and a half times regular wages, that eligible workers earn for hours worked beyond the standard full-time threshold.

Paid family and medical leave is a state-run insurance program, funded by payroll contributions, that replaces part of a worker's wages during leave for a new child or a serious health condition. Some states run one and others do not, which is what distinguishes it from the federal unpaid job protection and from an employer's own paid policy.

Parental leave is time off granted to a parent to care for a new child, which may be paid or unpaid depending on the employer and applicable laws.

A pay stub is the record accompanying your paycheck that itemizes your gross pay, taxes and deductions withheld, and the net amount you actually received.

Pay transparency is the practice of openly sharing salary ranges or pay information, which can help workers understand their market value and address pay gaps.

A workplace program that lets employees donate to charity through automatic deductions from their paychecks.

A performance bonus is extra pay awarded for meeting individual, team, or company goals, on top of your regular salary.

Performance shares are company shares awarded to employees only if specific business or stock goals are met, tying the payout to the company's results rather than just the passage of time.

Phantom stock is a bonus arrangement that pays an employee cash based on the value of company shares, giving them the financial upside of ownership without issuing real stock.

A qualifying disposition is a sale of shares from incentive stock options or an employee stock purchase plan that meets the required holding periods, allowing more of the gain to be taxed at favorable rates.

Real wages are earnings adjusted for inflation, showing what a paycheck can actually buy rather than just its dollar amount.

Relocation finances covers the costs and money decisions of moving for a job, such as moving expenses, cost-of-living differences, and any employer relocation package.

The income-tax questions that arise when someone lives in one state and works remotely for an employer based in another, which can affect where taxes are owed.

Restricted stock awards are grants of company shares given to an employee that carry conditions, such as staying with the company for a period, before the shares fully belong to the recipient.

Retirement date selection is choosing when to stop working with an eye on how the timing affects benefits, health coverage, taxes, and pension or bonus payouts.

RSU tax withholding is the tax taken out when restricted stock units vest, since their value counts as ordinary income — and the default withholding rate is often lower than what high earners actually owe.

A sabbatical is an extended break from work, sometimes paid, that an employer grants long-tenured employees for rest, study, or personal projects.

Salary negotiation is the conversation with an employer over your pay and benefits, an opportunity that can meaningfully raise your lifetime earnings when handled well.

Pre-tax contributions, sometimes called salary sacrifice, are amounts taken from your paycheck before income tax is calculated, such as to a traditional 401(k), lowering your taxable income now.

A Section 125 plan is the part of the tax code that allows employees to pay for qualifying benefits, like health premiums, with pre-tax income through their employer.

Sell-to-cover is a method of handling equity awards in which some of the vesting shares are automatically sold to pay the taxes due, letting you keep the remaining shares.

Severance negotiation is the process of discussing the terms of a departure package with an employer, potentially improving pay, benefits continuation, or other conditions before you agree.

A signing bonus is a one-time payment an employer offers to attract a new hire, sometimes with a requirement to repay it if you leave within a certain period.

An agreement between neighboring states that lets residents who commute across the border owe income tax only to their home state.

Stock appreciation rights give an employee a payout equal to the increase in a company's stock value over time, without requiring the employee to actually buy the shares.

A stock option exercise is the act of using your options to buy company shares at the agreed price, converting the right to buy into actual ownership of the stock.

A strike price is the fixed price at which an employee stock option lets you buy shares of company stock, regardless of the stock's current market value.

A student loan repayment benefit is an employer program that helps pay down an employee's student loans, sometimes on a tax-favored basis under current federal rules.

Supplemental life insurance is extra coverage you can buy on top of a base group policy, often through an employer, to increase your death benefit.

The tax withholding applied to pay beyond regular wages — such as bonuses, commissions, and severance — which follows special IRS rules.

Tipped income is money you earn from customer gratuities, which counts as taxable income and must be reported, even when paid in cash.

The tips deduction is a temporary federal deduction created by the 2025 tax law that lets workers in customarily tipped occupations deduct qualified tip income up to an annual cap, with the benefit phasing out at higher incomes.

Tuition reimbursement is an employer benefit that pays back some or all of an employee's education costs, often with a portion available tax-free under IRS limits.

Unlimited PTO is a policy that sets no fixed cap on paid time off, letting employees take leave as needed with approval rather than accruing a set number of days.

The use it or lose it rule means money left in a flexible spending account at the end of the plan year may be forfeited unless the plan allows a grace period or small carryover.

Vision insurance helps pay for eye exams, glasses, and contact lenses, typically for a modest premium.

Wage growth is the rate at which workers' pay rises over time, often compared against inflation to see whether earnings are keeping up with the cost of living.

A workplace wellness program is an employer initiative that encourages healthy habits, sometimes offering incentives like premium discounts or rewards for participation.

Workplace giving is a program that lets employees donate to charity through automatic payroll deductions.