Compensation processing allows you to calculate new base compensation amounts for your employees based on equity adjustments, fixed increase budgets, and performance. This blog post will cover the basic flow of compensation processing for Fixed compensation plans without factoring in performance. Pay for performance will be covered in a later blog post.
Plan the new compensation amounts and budgets
When getting ready to determine new compensation amounts for your employees, you may decide you want to adjust your compensation structures to provide employees with a cost of living increase or readjust for market values. To do this, you can go to Human resources > Setup > Compensation > Compensation grids. Select the grid to adjust and click the Compensation structure button. Here you can select the Mass change button. This allows you to adjust the whole structure, certain reference points in the structure, or certain levels in the structure by either a percentage or a fixed amount. In the following example, the Midpoint will be increased by 2% for levels G01, G02, and G03 after you click the Apply to grid button. You can continue to make adjustments or use the Reset button to set the structure back to the values that were saved last. Closing the form will save your changes.
To give your employees a Merit increase, you must set up a Fixed increase budget for each of your Departments: HR > Periodic > Compensation > Fixed increase budgets. (Alternatively, you can open this form through the Department: HR > Common > Organization > Departments > Departments > Compensation > Fixed increase budgets.) Here you can further specify whether employees in a certain Labor union or Location should get a different Increase percent. The Actual budget and Currency fields are informational and can be used to note a currency amount for the budget.
Set up the compensation Process
Now you can create a Process event: HR > Periodic > Compensation > Process events.
A Process event allows you to specify the parameters for the compensation processing. This includes the date period to evaluate for determining the compensation amounts (Cycle start and Cycle end dates) and the date that the new compensation amounts should go into effect (Transaction active date).
Optionally you can include a Fixed pay pro rated hire date if any of your Fixed plans use a hire rule of Percent. For those plans, anyone who was hired after the Cycle start date and before the Fixed pay pro rated hire date will receive 100% of their calculated merit or general increase. Anyone who was hired after the Fixed pay pro rated hire date and before the Cycle end date will receive a portion of their calculated increase based on how many days out of the total cycle days they were employed. For example, if our cycle runs from January 1 through December 31 and we have a Fixed pay prorated hire date of April 1, an employee who is hired in March will receive the full calculated increase while an employee hired on July 1 will receive approximately half of the calculated increase.
The process event Point-in-time date is only used for processing certain variable compensation plans and will not be covered in this blog post. The Load date is the deadline to make all the recommendations so that the new compensation amounts can be loaded into the employee's record. The load date is informational only.
Once the parameters of the process event have been Saved, you can click the Setup button to indicate the plans to include in this process run and which Fixed compensation actions to take for each plan.
Click the Add button in the top tab to add a compensation plan to the process event. Optionally, you can mark Enable pay for performance to have performance factored into the compensation calculation. Pay for performance will be covered in a later blog post. The Use other leverage, Leverage factor, and Leverage description columns are only used for Variable compensation plans and are not be covered in this blog.
Save the record, then click the Add button in the bottom tab to add Fixed compensation actions for the selected plan. Use the Enable recommendation option if you want to be able to enter a different amount other than the calculated guideline increase for the action. If you want an action to be calculated based on the result of the previous action to link multiple compensation actions, mark the Use previous result option on the General tab. Remember from our earlier blog post that Fixed compensation actions are types of compensation logic that you can give descriptive names to. For Grade and Band plans, you can only add Fixed compensation actions that are of the following Types:
Fixed compensation action type | Functionality |
Equity | Equity actions will compare the employee's pay rate as of the Cycle end date with the lowest Reference point for the Level indicated on the employee's Job. If the employee's pay rate is less than the minimum reference point, the system will calculate the increase needed to get the employee to the minimum. |
Merit | Merit actions will calculate an increase based on the employee's pay rate as of the Cycle end date and the Increase percent found in the Fixed increase budget for the employee's Department, Labor union, and Location. (Department is found on the employee's Position.) If the Fixed plan has Hire rule set to Percent, the merit increase will be adjusted to be proportionate to the number of days the employee was employed during the cycle. If the Fixed plan has a Range utilization matrix, the system will adjust the increase based on the Increase modifier percent for the employee's Range utilization. The Merit increase can also be factored by the employee's performance if Enable pay for performance is marked. |
General | General actions will calculate an increase based on either a Percent or give the employees a Flat amount. This is determined based on the settings on the General tab. |
Promotion | Promotion actions provide you with a named place where you can award promotion increases to specific employees. Promotion always create a 0 (zero-change) guideline increase so be sure to mark the Enable recommendation option so you can enter a recommendation for the employees who will receive promotions. Employees without a recommended increase will not have the Promotion action added to their fixed compensation records. |
Other level change | In the example above, Demotion is the name of our Fixed compensation action with a type of Other level change. This generates a 0 (zero-change) guideline increase so you can enter a recommendation amount to adjust the employee's pay rate. (Make sure to mark the Enable recommendation option.) Employees without a recommendation will not have this action added to their fixed compensation records. |
You can only add Fixed compensation actions with a Type of Step to a Step plan.
Fixed compensation action type | Functionality |
Step | On the General tab, indicate whether this Step action should move the employees forward 0 Steps, 1 Step, or 2 Steps. |
Run the compensation process
After the Process event has been set up with the necessary date fields, plans, and actions, you can click Run process on the Process event form. This will open the following dialog.
Here you can mark Show info to see an infolog showing how the compensation amounts were calculated for each employee. Clicking OK will run the compensation process for all employees who are in the selected compensation plans as of the Cycle end date.
View the process results
To view the process results, you can either click Compensation events on the Process event form, or navigate to HR > Periodic > Compensation > Compensation events. A new compensation event will be created each time the Process event is run. In this way, you can do trial runs, make adjustments, and run the compensation process event multiple times to see how various changes impact employee compensation.
The Compensation event contains information about the process run including when the run occurred, the user who ran the process, and if there were any errors when the process was run. Optionally, you can mark the Locked option to disable the Load compensation button and prevent anyone from loading the compensation events to the employee records. Clicking the Employees button will open the Event employees form show you the list of employees included in the run.
From here you can select an employee and click the Recommendation button to open the Recommendation form for that employee.
The Overview tab shows the summary information for each of the plans the employee has if those plans were included in the Process event and the summed Guideline and Recommended amounts. The General tab shows more information about the line selected in the Overview tab. The Fixed overview tab will contain a record for each action included in the process event for the compensation plan. The Fixed general tab will show more information for the action selected on the Fixed overview tab. If the action had Enable recommendations marked, the Recommendation fields will be editable on the Fixed general tab. This will let you manually adjust the amounts for the employee. Note: if you marked Use previous result for the action on the Process event, you must manually update the amounts for any dependent actions.
Once the compensation amounts have been reviewed for an employee and any adjustments to the recommended values have been made, you can change the Status on the Employee event line to indicate whether the event has been Approved or should be Ignored. Optionally, you can erase any changes made to the employee's recommendation by clicking the Recalculate button. This will mark the existing employee event with a status of Ignore and create a new employee event with recalculated values.
Loading approved compensation changes
Once one or more Employee events have had their Status updated to Approved, they can be loaded to the Employees' fixed compensation records. This can be done either by selecting each Employee event one at a time and clicking the Load employee compensation button on the Event employees form, or by clicking Load compensation on the Compensation events form to load all Approved employee events at once.
Clicking OK in the Load compensation dialog will add the non-zero compensation action lines to the Employee fixed compensation form (HR > Common > Workers > Employees > Compensation tab > Fixed compensation).
Here we can see that two fixed compensation lines were added for the employee, June Low: one for her Merit increase and one for her General increase. The other compensation actions did not cause any change to June's compensation and were not added to her record. Both have an effective date set to the Transaction active date from the Process event. Because the Merit action came first, it also has an expiration date set to the Transaction active date. The last fixed compensation record contains the sum of all the compensation actions and is used as the new pay rate going forward from the Transaction active date.