Planning Your Compensation/Variable Pay Project – Next Steps

By on June 6th, 2018 in HCM Technology Solutions

This is part 2 in a two-part series. If you haven’t read part 1, you can read that here.

Are you planning to implement SuccessFactors Compensation or Variable Pay? The intent of this blog is not to provide you answers to all of your questions, but to help you think through some options that may be relevant to your company. Some questions, when answered early, can make the requirements-gathering sessions a little less painful and ensure a successful implementation for your organization.

How many plans do I need?

  • A compensation plan can support multiple countries, currencies, and languages so that will not be a deciding factor for the number of plans that you will need.
  • If different groups (countries, locations, etc.) run the processes at different times, you will need a separate plan for each occurrence. It will be in your best interest to standardize your processes to run at the same time wherever possible as this will not only make your implementation smoother, it will also make ongoing support within your company easier.
  • Some companies choose to divide the different pay frequencies into separate plans, that is, hourly vs salaried. This is not necessary, but it is an option.
  • Which processes will be included could play a role in the number of plans. A compensation plan could include Salary Review (Merit, Adjustment, Promotion, and Lump Sum), Short-Term Incentives (Bonus), and Long-Term Incentives (Stocks, Options, or Restricted Stock Units [RSUs]).
  • Do you need to create one or more Variable Pay forms as opposed to using only Compensation forms? Based on the information from my previous blog, you should have a good idea whether you will need to create a Variable Pay Plan to address all of your needs or if a Compensation Plan would be sufficient. If your bonus cycle runs at a different time than your compensation cycle, you can create a separate compensation form for Bonus only.
  • With the Q2 2018 Release, SAP introduced a Total Compensation Planning template that allows planners to view the total cash compensation of employees in one worksheet. This includes salary, stock, and variable pay in one worksheet.

Where will the data come from?

  • Non-Employee Central Customers. For each field in the worksheet, you need to define where the data is coming from. Your options are:
    • User Data File (UDF): You will define an import key in the worksheet for the fields that are coming from the data file. A download of this file template specific to a compensation plan will include all relevant master data for you. You can then maintain the compensation fields and upload the file prior to launching worksheets to populate fields with an import key.
    • Formulas: The field is calculated based on a formula that you provide.
    • Lookup Tables: Lookup tables are used in custom formulas to map data to an employee based on certain attributes if the required information is not listed in one of the compensation worksheet columns, for example, Budget % by country. If you maintain it in the UDF, you have to enter it for every employee. If you maintain it in a lookup table, you only maintain it once. If this data changes, enter the new value in the lookup table and run the worksheets update to update the values for relevant employees.
  • Employee Central Customers
    • You now have a choice on whether you want to use the UDF (as stated for Non-Employee Central Customers) or whether you want to use the integration between Employee Central and Compensation.
    • If you choose the latter, you will no longer be able to maintain Import keys. Instead, you will maintain the data in Employee Central and map it to the worksheet fields in the Compensation Plan.
    • Formulas and lookup tables will remain the same as for Non-Employee Central customers above.
  • Talent Hybrid Customers
    • “With many customers migrating from an SAP on-premise solution to an SAP and SuccessFactors talent hybrid solution, we get a large number of questions around integration. SAP delivers an add-on that helps automate much of the data transfer between the two systems, but it is only a framework for integration. There is still quite a bit of configuration and development required to send data back and forth between the two environments.”
    • The above statement is an extract from a great blog, “The Good, The Bad, and The Ugly of SuccessFactors Talent Hybrid Integration” that was written by a colleague of mine, Michael White. He explains what is available and what is required to make this fully functional. To read in full, click here.
    • In this blog, I will not cover the different ways that you can move data from SAP on premise to SAP SuccessFactors other than this can be automated with configuration and/or development work.

Who will need access to worksheets?

Are certain fields hidden for one group of users but visible to others? Think about the different roles that you will need and for each role, what (on a high level) they will need to see.

Here are a few examples of roles and responsibilities:

  • Compensation Administrator
    • Make changes to the worksheet configuration if needed (update the guideline matrix, update eligibility rules, update budget calculations, change formulas, etc.).
    • Proxy as planner to troubleshoot issues.
    • Launch worksheets.
    • Delete worksheets.
    • Run updates.
  • Planning Manager
    • Recommend increases, adjustments, and lump sum payments to direct reports.
    • Promote direct reports.
    • Approve increases, adjustments, lump sum payments, and promotions for indirect reports.
  • HR Administrator
    • Proxy as planner to troubleshoot issues for planning managers within their group.
  • Executives
    • Review a combined list of all direct and indirect employees within their departments and file by location, department, and other select criteria as needed.
    • Review the overall budget for the entire group.

Who will be planning and approving worksheets and what process will you use?

There is more than one way to route the forms through the process.

Route Maps:

A route map determines the workflow for a compensation worksheet. Compensation worksheets need to be routed to several employees. For example, a compensation worksheet could start with the manager to make the initial recommendations, then move to the second level manager for review, and finally to the HR representative for approval. The path followed by a worksheet is determined by a route map.

You can set an automatic forward date to route all forms to the next step regardless of where the manager is in the planning process. No planning data will be lost in the process.

Figure 1 – Route Maps

Hierarchy-Based Approval (HBA):

This is an alternative way of handling workflows. Customers can use HBA instead of the traditional route map approach. It provides tree navigation for the organization hierarchy and a simplistic approval process based on the hierarchy.

Planning is still done on individual worksheets but approval or rejection is done for the entire organization at one time.

Figure 2 – Hierarchy-Based Approval (HBA)

Executive Review (This option can be used regardless of whether you use route maps or HBAs.):

This provides a way for users to see and/or manage the compensation planning process for a large population of employees—usually an HR Representative, a Compensation Administrator, or as the name indicates, Executives to view their entire organization.

Executive Review enables a user to see all data that a compensation planner can see on a worksheet, including demographic data, merit increases, adjustments, and etc. Whether data can be updated will be determined by permissions granted.

Executive Review is not tied to the route map in any way. A person with Executive Review permission does not have to be in the workflow and can be inside or outside of the hierarchy. Companies typically choose to have a holding step in the route map where all worksheets are sent to an administrator. Executive Review is used at this time to view the data in the worksheets. There is no approval feature in Executive Review, which is only available for viewing and editing. Once all updates are made within the Executive Review, the administrator will complete all worksheets.

Figure 3 – Executive Review

How many statements do I need?

If using compensation and variable pay, you have the option of creating one statement for each worksheet or you can select to have one combined statement for both. Also consider the number of languages this needs to be displayed in. Who will do the translations? Who will have access to view statements, and when will each group get access?

Before you decide on the format of your statement, look at the standard statements. Project scope is usually based on a statement that follows the standard layout unless otherwise specified.

Do I need to use Rewards and Recognitions?

Reward and Recognition occurs outside of the regular compensation planning period. They are often subject to the same budget, eligibility, guidelines, and approval process as focal events, but since participation is limited, they do not lend themselves well to worksheet tools.

If you are planning to use Rewards and Recognitions, here are some questions to consider:

  • Will you allow peer-to-peer nominations or only within your manager hierarchy?
  • If you allow peer to peer, who will approve?
  • Will there be a specific budget?
  • Who will be eligible to receive a reward?
  • What will the approval process be for an award and will it differ based on the amount that is awarded?

In closing:

I hope that the information provided in this document will assist you in making some important decisions regarding your project. Remember that this is an opportunity to streamline processes—it is not every day that you get this opportunity so make the most of it! More important, have fun and good luck with your project!

References:
1) Compensation – Process Summaries from the SAP SuccessFactors Process Library
2) SAP SuccessFactors Compensation Configuration Workbook
3) Variable Pay Implementation Guide – Document Version: Q1 2018 – 2018-04-06
4) Compensation Implementation Guide – Document Version: Q1 2018 – 2018-04-06
5) “The Good, The Bad, and The Ugly of SuccessFactors Talent Hybrid Integration” – Blog written by Michael White. Published on November 10, 2017
6) “What Is the Difference Between SuccessFactors Compensation and Variable Pay? Do I Need Both?” – Blog written by Vivian Reynecke. Published on April 26, 2018
Note: You need an SAP S-ID to access the first four resources. The two blogs can be accessed by everyone.
Vivian Reynecke

Vivian Reynecke

I started working on SAP in 1994 and I was hooked the first time I saw the system.I have worked in the HCM space right form the start, so I have evolved with the system.Because of my SAP experience, I had the opportunity to immigrate to the USA with my husband towards the end of 1995.

I worked on all HCM modules but around 2005 my focus was the Talent Management modules (Learning Management, Compensation (including Variable Pay), Recruiting, Succession & Career Development and Performance Management).By the end of 2009 I was the Capability Lead for the SAP HCM Talent Management group.

In 2012 (shortly after the acquisition of SuccessFactors by SAP) I started training on SuccessFactors.I was very excited because everything that was “missing” in SAP ECC, was covered in the SuccessFactors Modules.I was given so many wonderful opportunities over the years to expand my knowledge – I worked on proposals, resource allocations, project pricing and so many other things.As with everything else, life threw me a number of curveballs, but with the support and the encouragement of all of my colleagues, friends and family, I was able to overcome stumbling blocks.

I recently became part of the GP Strategies family and I am very excited to see where this new adventure is going to take me.
Vivian Reynecke

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