Defining a compensation program

Select Compensation > Set Up > Incentive Compensation.

On the Compensation Programs tab, click Create.

On the Program Detail tab, specify this information:

Compensation Program

Specify a short and long description for the compensation program.

Version Date Range

Select a date range for the version, typically one year starting January 1. These dates must match the compensation schedule dates for all pay components that are attached to this compensation program.

Status

Select a status for the compensation program. Preliminary or Inactive compensation programs cannot be assigned to resources or work assignments.

Currency

If enrollment is only for resources with a particular currency on the work assignment, select that currency. For example, if the target is 10,000, specify whether the amount is USD, CAD, EUR, or some other currency.

If enrollment is not dependent upon currency, leave this field blank.

Currency is required if there are amounts defined for target variable compensation or defined as payout amounts on compensation tables that are used on this compensation program.

Enrollment Group

Select an enrollment group if enrollment is automatic based on an enrollment group. For example, resources with active, full-time work assignments. You can define groups that are only used for compensation. You can also define target compensation for different eligibility groups.

Plan Entry Rule

Select a plan entry rule, also known as a waiting period, for the compensation program. See Defining incentive compensation program plan entry rules.

Program Manager

Select the manager for the compensation program. The program manager is a default person to use for process flow if the manager for the resource is unavailable.

You can use this field to filter compensation programs by compensation manager or for process flow approval processes. For example, if an individual in the approval process flow is not available, the approval is sent to the compensation manager.

If you use an approval process, the program manager is required.

Exclude From Enrollment Group Updates To Eligibility Dates

Select this check box to exclude any changes from enrollment group updates. In most cases, do not flag this. You can use this field to enroll all employees who should remain in the plan regardless of status changes.

Approval Process Required Prior To Enrollment

If approval is required, select this check box.

On the Program Targets tab, define the potential maximum earnings that can be paid to a resource in the compensation program. Target compensation that you define on this tab apply to all resources enrolled in the plan.

The target compensation is defaulted to all enrolled resources. You can override it at the pay component or resource level.

Note:

To create target compensation that applies to specific eligibility groups, leave the Program Targets tab blank. After you save the compensation program, the Target Variable Group Targets tab is displayed. Specify your target compensation by eligibility group on that tab.

Specify this information:

Amount

Specify a target amount. Specify an amount or a percent, but not both. If you specify an amount, select a currency code on the Enrollment Information tab.

If a resource is less than 1.0 FTE and you specify a flat amount target, that amount is not adjusted for the FTE percentage. For example, if an employee’s work assignment is .70 FTE and you want the target compensation to be 7,000, specify 7,000.

Percent

Specify a percent for the target compensation. Specify an amount or a percent, but not both. If you specify a percent, select the options for the target percentage.

If a resource is less than 1.0 FTE and you specify a percent of the base pay, the derived target is not reduced by FTE. The base pay is expected to be reduced by the FTE when you specify it on the work assignment. For example, if a full-time salary is 100,000 and the work assignment is .70 FTE, the work assignment rate of pay is 70,000. Therefore, if you specify a target compensation of 10 percent, the estimated target compensation is 7,000.

Factor

If you specified a percent, select whether to base the percent on the resource's base pay, the salary structure midpoint, or Resource Other Amount 1-5, which was specified on Resource > Other Pay > Other Amounts.

Option

If you specified a percent, select the date on which the percent is based.

If you select Prorate for Changes, the target compensation changes in proportion with pay changes that occur in the period.

If you select As of Calendar Date, the target compensation is fixed to a specific calendar date that you select in the As of Date field.

As of Date

If you select As of Calendar Date in the Option field, select the date on which the target compensation is calculated.

On the Terms And Conditions tab, specify the terms and conditions for the compensation program. These items are used on Employee and Manager Spaces when they agree to the terms and conditions of the compensation program.

Note:

This text is in Rich Text Format (RTF) and can be formatted with options such as font type and size, bold, underline, italics, strike-through, and text alignment.

Click Save.

If your target compensation percentage is defined by group, use the Group Targets tab to define the potential maximum earnings that can be paid to a resource in the compensation program. When you use eligibility groups to define target compensation, it is not required to create separate compensation programs when the rules for target variable compensation change. Instead, you can manage this within one compensation program.

If you specified an enrollment group on the Program Details tab, the eligibility groups must be subsets of the enrollment group.

Targets can be defined as flat amounts or percent of a factor.

Click Create.
Specify this information:

Eligibility Group

Select an eligibility group for the target compensation.

Amount

Specify a target amount. Specify an amount or a percent, but not both.

Percent

Specify a percent for the target compensation. Specify an amount or a percent, but not both. If you specify a percent, select the options for the target percentage.

Factor

If you specified a percent, select whether to base the percent on the resource's base pay, the salary structure midpoint, or Resource Other Amount 1-5, which was specified on Resource > Other Pay > Other Amounts.

Option

If you specified a percent, select the date on which the percent is based.
If you select Prorate for Changes, the target compensation is changed in proportion with changes that occur in the period.
If you select As of Calendar Date, the target compensation is fixed to a specific calendar date that you select in the As of Date field.

As of Date

If you select As of Calendar Date in the Option field, select the date on which the target compensation is calculated.

Click Save.

On the Pay Components tab, add the pay components that are part of the compensation program.

Click Create.
Specify this information:

Pay Component

Select a pay component. You can add a combination of external metric pay components, bonus objectives pay components, and bonus award pay components.

Category

If a value exists on the pay component for the Category field, it is defauted on the compensation program pay component. You can modify it.
On the Target Variable Compensation tab, specify this information:

Amount

Specify a target amount. Specify an amount or a percent, but not both.

Percent

Specify a percent for the target compensation. Specify an amount or a percent, but not both. If you specify a percent, select the options for the target percentage.

Factor

If you specified a percent, select whether to base the percent on the resource's base pay, the salary structure midpoint, or Resource Other Amount 1-5, which was entered on Resource > Other Pay > Other Amounts.

Option

If you specified a percent, select the date on which the percent is based.
If you select Prorate for Changes, the target compensation is changed in proportion with changes that occur in the period.
If you select As of Calendar Date, the target compensation is fixed to a specific calendar date that you select in the As of Date field.

As of Date

If you select As of Calendar Date in the Option field, select the date on which the target compensation is calculated.

Weight

If you do not assign an amount, you can assign a weight to a pay component that is applied against the compensation program target.
Note: The weight is required if you have defined a compensation program target, if the pay component's payout formula includes the weight, or both.
On the Compensation Payout Rules tab, specify this information:
Compensation Schedule

Select a compensation schedule. This 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 should be 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 works.

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 select months as the prorate method, select whether the proration starts before or after the entry point. For example, if a compensation period is from January 1 to March 31, 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

Optionally, 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.
The default is Normal.

Round To

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

Pay Code

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

Payouts Exceeding Target

Select the option that determines how the application handles payouts that exceed an resource's target compensation.
If you select Payout Calculated Amount, the application creates the calculated payout even if the payout exceed the target compensation.
If you select Target Compensation, the application creates a payout equal to the target compensation.
If you select Do Not Create Payout, the application does not create a payout. A warning is sent to the compensation analyst, who then specifies the payout amount manually.

Planning Rule, Version Date
If the pay component is a bonus award pay component, click the Attach Planning Rule button to select the planning rule and version date that is used to associate this component with an awarding view.
The compensation program pay component is updated using the correct effective date in the planning rule.
The effective date of the action is determined in this way:
- If the creation date of the planning rule is less than or equal to the creation date of the compensation program pay component, update the compensation program pay component as of the creation date of the compensation program pay component.
- If the creation date of the planning rule is greater than the create date of the compensation program pay component, update the compensation program pay component as of the creation date of the planning rule.
Note: You can associate more than one bonus pay component with the same planning rule and version date. The multiple bonus payouts amounts are totaled for display on the compensation awarding view that the planning rule is part of.
Display Quotas On Resource Enrollment Summary

Select this check box to display the quotas on all of the enrolled resources' summary forms. If quotas are defined at the resource level, the resource quotas are displayed.
Note: This option is valid only for external metrics pay components with target quotas by period (thresholds, target quotas, and maximums) defined.
Click Save.
The compensation program is created in Preliminary status.
If the pay component is an External Metric pay component, the Target Quotas By Period tab and the External Metrics tab are displayed.
Optionally, for External Metric pay components that use target quotas in their calculations, on the Target Quotas By Period tab, specify threshold, target quota, and maximum values for each period. If you select Display Quotas On Resource Enrollment Summary, these values are defaulted on the summary forms for resources enrolled in the compensation program.

Note: These compensation table types use target quotas in calculations or payouts: Interpolation Using Target, Cumulative Using Target, Percent of Target Quota, Interpolation Percent Of Target Quota, and Step Percent Of Target Quota.
Click the External Metrics tab to define external metrics for this compensation program and pay component by period.
You can also define external metrics on Variable > External Metrics > Compensation Program External Metrics. See Defining external metrics for compensation programs.

To change the order in which pay components display on the Pay Components tab and on summary forms for resources enrolled in the compensation program, on the Pay Components tab, in the New Print Sequence column, specify the sequence number for each component, and click Save.

Note: You are not required to specify a new number for each pay component. For example, if you have 5 pay components numbered 1 to 5 and want the current number 4 to become 2, type 2 next to the number 4 and save. Former components 2, 3, and 5 are reordered as 3, 4, and 5.

Follow-up tasks:

To make the compensation program eligible for enrollment, change the status to Active.
To create a new version of a compensation program for the next year, select the compensation program on the compensation program list. Click Actions > Create a New Version from an Existing Version or open the compensation program and click Create New From Existing. Select a new version date and end date, and click OK.
Note: Any compensation schedules that are used by the new version must have matching version dates. You might be required to create new versions of the compensation schedules. For example, if you create a compensation program with a version date of 01/01/2019, the compensation schedule that you select must also have a version date of 01/01/2019.