Performance Related Pay
Performance Related pay is a remuneration system whereby the employee's pay is based on his or her performance. It is basically a payments by results system that is designed to give incentive to the employee to work harder or more productively. In its simplest form, this may be an annual bonus based on subjective assessment of performance. In many larger organisations this can be more structured, based on a set of pre-agreed objectives or targets. Performance related pay is becoming increasingly popular as companies look for more ways to encourage staff and gain a competitive advantage. |
Similar financial terms
Performance sharesShares of stock given to managers on the basis of performance as measured by earnings per share and similar criteria. A control device used by shareholders to tie management to the self-interest of shareholders.
Performance measurement
The calculation of the return realized by a money manager over some time interval.
Performance evaluation
The evaluation of a manager's performance which involves, first, determining whether the money manager added value by outperforming the established benchmark (performance measurement) and, second, determining how the money manager achieved the calculated return (performance attribution analysis).
Performance attribution analysis
The decomposition of a money manager's performance results to explain the reasons why those results were achieved. This analysis seeks to answer the following questions: (a) What were the major sources of added value? (b) Was short-term factor timing statistically significant? (c) Was market timing statistically significant? And (d), Was security selection statistically significant?
BARRA's performance analysis (PERFAN)
A method developed by BARRA, a consulting firm in Berkeley, California. It is commonly used by institutional investors applying performance attribution analysis to evaluate their money managers' performances.
Accounts payable
Money a company owes to its suppliers
Zero prepayment assumption
The assumption of payment of scheduled principal and interest with no payments.
Dividend payout ratio
A ratio showing the percentage of net profits paid out in dividends on common stock, after reducing net profits by the amount of dividends paid on preferred stock.
Target payout ratio
A firm's long-run dividend-to-earnings ratio. The firm's policy is to attempt to pay out a certain percentage of earnings, but it pays a stated dollar dividend and adjusts it to the target as base-line increases in earnings occur.
Take-or-pay contract
A contract that obligates the purchaser to take any product that is offered to it (and pay the cash purchase price) or pay a specified amount if it refuses to take the product.
Single-payment bond
A bond that will make only one payment of principal and interest.
Production payment financing
A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service.
Prepayments
Payments made in excess of scheduled mortgage principal repayments.
Prepayment speed
Also called speed, the estimated rate at which mortgagors pay off their loans ahead of schedule, critical in assessing the value of mortgage pass-through securities.
Payment-In-Kind (PIK) bond
A bond that gives the issuer an option (during an initial period) either to make coupon payments in cash or in the form of additional bonds.
Pay-up
The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or other borrower to pay a higher rate of interest to get funds.
Payout ratio
Generally, the proportion of earnings paid out to the common stockholders as cash dividends. More specifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.
Payments pattern
Describes the lagged collection pattern of receivables, for instance the probability that a 72-day-old account will still be unpaid when it is 73-days-old.
Payments netting
Reducing fund transfers between affiliates to only a netted amount. Netting can be done on a bilateral basis (between pairs of affiliates), or on a multi-lateral basis (taking all affiliates together).
Payment float
Company-written checks that have not yet cleared.
Payment date
The date on which each shareholder of record will be sent a check for the declared dividend.
Paydown
In a Treasury refunding, the amount by which the par value of the securities maturing exceeds that of those sold.
Payback
The length of time it takes to recover the initial cost of a project, without regard to the time value of money.
Payable through drafts
A method of making payment that is used to maintain control over payments made on behalf of the firm by personnel in noncentral locations. The payer's bank delivers the payable through draft to the payer, which must approve it and return it to the bank before payment can be received.
Level pay
The characteristic of the scheduled principal and interest payments due under a mortgage such that total monthly payment of P&I is the same while characteristically the principal payment component of the monthly payment becomes gradually greater while the monthly interest payment becomes less.
Lag response of prepayments
There is typically a lag of about three months between the time the weighted average coupon of an MBS pool has crossed the threshold for refinancing and an acceleration in prepayment speed is observed.
Balance of payments
A statistical compilation formulated by a sovereign nation of all economic transactions between residents of that nation and residents of all other nations during a stipulated period of time, usually a calendar year.
Break-even lease payment
The lease payment at which a party to a prospective lease is indifferent between entering and not entering into the lease arrangement.
Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of a predetermined benchmark MBS coupon. Used to identify for coupons higher than the benchmark coupon the prepayment rate that will produce the same CFY as that of the benchmark coupon; and for coupons lower than the benchmark coupon the lowest prepayment rate that will do so.
Clearing House Automated Payments System (CHAPS)
A computerized clearing system for sterling funds that began operations in 1984. It includes 14 member banks, nearly 450 participating banks, and is one of the clearing companies within the structure of the Association for Payment Clearing Services (APACS).
Clearing House Interbank Payments System (CHIPS)
An international wire transfer system for high-value payments operated by a group of major banks.
Coupon payments
A bond's interest payments.
Customary payout ratios
A range of payout ratios that is typical based on an analysis of comparable firms.
PAYE (Pay-As-You-Earn)
PAYE is a scheme for the collection of income tax due from the earnings of an individual. In this scheme, tax is deducted by the employer before wages or salary is paid to the employee.
