Defining bonus objective pay components

Use this procedure to define pay components based on a bonus objective. These pay components pay out based on the attainment of goals, which are set by the employee and manager for a specific compensation period.

  1. Select Compensation > Set Up > Incentive Compensation.
  2. On the Pay Components tab, select Actions > Create Bonus Objective Component.
  3. On the Main tab, specify this information:
    Effective Date

    Specify the date on which the pay component is effective. This date should be on or before the compensation program version to which you are attaching this pay component.

    Pay Component

    Specify a short and long description for the pay component. For example, Revenue Component or Key Performance Indicators Component.

    Active

    Select this check box to indicate that the pay component is active.

    Category

    Use this field to further categorize or describe the component.

    If this field is specified, it will default on the compensation program pay component and from there to the employee compensation program which will then display on the resource's enrollment summary form.

    Narrative For View By Resources

    Specify any information that you want the resource to view about the compensation program; for example what is being measured and so on. This is viewed by the resource on their Resource Compensation view for Employee Spaces.

  4. Optionally, on the Payout Rules tab, specify this information:
    Compensation Schedule

    Select a compensation schedule. This schedule determines how frequently the pay component is calculated and paid out.

    Compensation Table

    Select a compensation table. The table defines the payout calculation based on levels of attainment.

    Prorate Option

    Select if compensation is prorated for partial compensation periods. For example, if a compensation period is quarterly, and a resource becomes eligible after the period starts, select Prorate if their compensation is prorated for that period. If you select None, the resource receives the full amount.

    Proration is based on eligibility dates. If you select Prorate in this field, use the Prorate Method and Nearest Point fields to determine how the proration will work.

    Prorate Method

    If you selected Prorate in the Prorate Option field, select the method that determines whether the calculation uses months or days in determining the amount to be prorated.

    Nearest Point

    If you selected Prorate in the Prorate Option field, select whether the proration starts before or after the entry point. For example, if a compensation period is from January 1 to March 31, with the proration method is months, and a resource becomes eligible February 15, select Before to prorate the amount from February 1. Select After to prorate the amount from March 1.

    Rounding Method

    Select the rounding method to use.

    If you select Normal, the number rounds up if the last digit is five or greater. It rounds down if the last digit is less than five.

    If you select High, the number rounds up.

    If you select Low, the number rounds down.

    Round To

    Specify the rounding precision. For example, to round to two decimals, type 0.01.

    Pay Code

    Specify a pay code.

    This field is for information only, and can be interfaced to a payroll application.

    Payouts Exceeding Target

    Optionally, select the option that determines how the application handles payouts that exceed a resource's target compensation. If you select Payout Calculated Amount, the application creates the payout even if the payout exceed the target compensation.

    If you select Target Compensation, the application creates the payout up to the target compensation.

    If you select Do Not Create Payout, the application does not create a payout and sends a warning is sent to the compensation analyst.

  5. Optionally, on the Bonus Objective tab, specify this information:
    Bonus Objective Text

    Specify the text for bonus objectives. This text is used to define the bonus objective.

    Bonus Objective Approval Text

    Specify the text for bonus objective approvals. This text is used to present the bonus objective to the managers and employees for their approval.

    Bonus Objective Period Auto Create

    Select this check box for the application to automatically create subsequent bonus objective periods when a period for bonus objectives is complete.

    If you do not want the bonus periods created automatically, clear this check box. If you leave this field blank, periods must be defined manually by running the Create Next Bonus Period action.

    Bonus Objective Initiation

    Select if the manager or the administrator, or both the manager and the resource are allowed to create bonus objectives for this pay component. The roles that you select can view bonus objective periods and create new bonus objectives for that period.

    Note: 

    If a manager creates bonus objectives, they are submitted to the employee for approval. If an employee creates bonus objectives, they are submitted to the manager for approval. If both the manager and employee can create bonus objectives, either role can submit the bonus objectives to the other role.

    Rating Scale

    Select the scale upon which bonus objectives are measured. The scale must match the scale selected on the compensation table.

    This field is required if the compensation table has a rating scale.

  6. Click Save.

    The Goal Category tab becomes accessible.

  7. Optionally, on the Goal Category tab, define aggregate, minimum, and maximum weights for goal categories that are associated with the bonus objective component.
    Note: If goal categories are defined on a pay component that is attached to a compensation program, any bonus objective goals that managers or resources create for that compensation program and applicable bonus objective period must be associated with one of these goal categories.
    1. Click Create.
    2. On the Goal Category form, specify this information:
      Goal Category

      Select the goal category.

      Aggregate Limit For Goal Category

      Specify the aggregate weight limit for the goal category.

      As bonus objective goals are created for the category, the total weight of the goals must not exceed the aggregate limit.

      Individual Goal Weight Minimum, Maximum

      Specify each goal's minimum and maximum weight. The maximum weight cannot exceed the aggregate limit.

      As goals are created for the goal category, the weight of each goal cannot be below the minimum or above the maximum.

      Goal Required for Category

      Select this check box if a bonus objective goal must be created for each resource for this goal category.

    3. Click Save.
  8. Add the bonus objective component to a compensation program.
    See Defining a compensation program.