To describe the incentive compensation process, let’s start with what compensation means. Compensation is defined as the total amount of monetary payment provided to an employee, for work performed. Compensation Plans calculate and compensate each payee based on their performance measurements. This is called Variable Incentive Compensation. The components of compensation are detailed in a compensation plan. This plan contains a set of rules that specify how to compensate each payee.
Bikes in Motion is a fictional company that sells different type of bikes, cycling apparel and gear, and replacement parts. It sells to sporting goods stores, general retailers, and specialty shops globally through a team of Sales Representatives. Each Sales Rep uses a Customer Relationship Manager (CRM) such as SAP Cloud for Customer to enter and track their opportunities. Once an opportunity is won and the sale is final, it moves into Incentive Management and becomes a Transaction.
The Compensation Administrator manages the compensation process in the user interface by managing Compensation Plans, Rules, and other compensation elements to ensure each Sales Rep is compensated accurately for their sales.
As compensation is calculated, the Sales Rep can track their progress by viewing their results in a Dashboard.
At the end of the compensation period, the payments are sent to a payroll or accounts payable team for processing.