What Is the Difference Between SuccessFactors Compensation and Variable Pay? Do I Need Both?

Have you ever purchased a new item and you cannot wait to get home to try it out just to realize that there are no assembly instructions? The same type of dilemma is often encountered when implementing new software applications. In this case, you purchased SuccessFactors Compensation and now you need to determine whether you need to implement Variable Pay, as well. With so many features available to meet your compensation planning requirements, your decision on which one to use is key to achieving an optimal solution for your organization.

Let’s review the difference between the two applications. In part two, coming soon, we will cover key questions to ask yourself when deciding which application or applications you will need.

What is the difference between SuccessFactors Compensation and SuccessFactors Variable Pay?

Compensation

The SuccessFactors Compensation module addresses three main areas:

  • Salary: Fixed salary paid to employees and includes Merit, Market Adjustments, Promotions, and Lump Sum Payments.

  • Short-Term Incentives – Bonus Payments: The bonus calculations are not very complex in the Compensation module. They rely on the fact that a number of the calculations are being done outside of the worksheet and are either mapped for Employee Central (EC) customers or imported using a .csv file called the User Data File or UDF (this option is available for both EC and non-EC customers). Any pro-ration due to employees moving in and out of positions needs to be calculated outside of the Compensation module, and the results must be fed back into the worksheet by using the import file. The Bonus section (should you decide to include it in your Compensation worksheet in the future) will be included as one of the sections on the form in 1(a) above.

  • Long-Term Incentives: These incentives include Stocks, Options, and RSU’s (Restricted Stock Units). There is a separate tab in the Compensation worksheet for the Equity data.

Variable Pay

The SuccessFactors Variable Pay module addresses complex bonus calculations that are based on one or more of the following goals:

  • Individual goals
  • Team goals
  • Business/Group goals (can have more than one)

There is a separate section for each goal type with relevant weightings and multipliers. A History file enables you to import the assignments for an employee for the entire bonus period. Employees could have multiple rows within the History file if there was a change that could affect their bonuses.

To get this information in to the system, you can either:

  • Import the file.
  • Map the data fields to EC fields and run a program that will populate the data for you.

Variable Pay allows you to perform separate calculations for different time periods in a same year. You can perform separate calculation for employees who move from one business unit, division, or location to another. All of the separate calculations are then summed up to calculate one final payout amount. Upon opening the worksheet, the planner will see a total line for each employee:

Total Line (Planner Worksheet):

Upon making a selection to view the details, the planner will see the Assignment Details and Goal Details:

Assignment Details:

Goal Details:

The Employee History is usually only available to Compensation Administrators and not to the Planner. The information in the assignment history comes from the History file. It is also used to determine Business and Team goal information and to calculate the bonus payment for each section that will then be used to calculate the final payout amount:

Employee History:

In closing:

I hope that the information provided in this document will assist you in making the correct decision for your business. Remember that if you decide to create only a Compensation plan this year, there is nothing preventing you from having a Compensation and a Variable Pay plan next year.

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References:

Note: You need an SAP S-ID to access the resources.

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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