Introducing SAP SuccessFactors Variable Pay

SAP SuccessFactors Variable Pay implements a strategy for allocating individual, team, and group rewards based on the achievement of individual and organizational targets during the year.

It uses a formula-based approach to calculate bonuses from weighted target incentive pay programs.

At a high-level, SAP SuccessFactors Variable Pay is the end-to-end solution for a streamlined bonus planning and payout process. Features include:

• Manages employee with bonus target amounts.

• Calculates bonus payout on weighted business, individual, and/or team goals.

• Integrates employee performance into bonus calculation either as a multiplier or as an additive component.

• Assigns bonus plans based on one or more employee history fields.

• Prorates the bonus target amount for employees who are on a plan for a portion of the plan period.

• Supports point-in time bonus calculation (MBO).

Some bonus programs are NOT supported by SAP SuccessFactors Variable Pay and are NOT addressed in this course:

• Sales Incentive/Commission program

• Point value proxy systems

• Non-cash bonus systems

The following list outlines several advantages in using SAP SuccessFactors Variable Pay over the SAP SuccessFactors Compensation MBO tab:

• SAP SuccessFactors Variable Pay manages several bonus plans with weighted business goals in a single program.

• Employees can be assigned to more than one bonus plan.

• Bonus plan assignment or eligibility is determined by a lookup field in the employee history data file (not to be confused with the user data file).

• SAP SuccessFactors Variable Pay compares business goal results to target and calculates payouts using interpolation or step scale.

• In addition to individual performance, Variable Pay can use a team’s Performance Management form ratings/achievement and guidelines to calculate final payout.

• SAP SuccessFactors Variable Pay applies bonus caps to limit the bonus plan payout.

• SAP SuccessFactors Variable Pay is usually managed by compensation administrators (not individual managers).

Variable Pay facilitates the administration of complex bonus calculations that include quantitative business performance and employee performance measures and the data comes from multiple import files.

Some of these data sources are also available from the user interface, but for this example, we assume that all data is coming from imports.

• The user data file - stores the unique identifier of each employee (userId). The userId is what is used to identify the employees in the employee history data file.
• Employee history data file - contains a list of bonus-eligible employees. Each assignment row will have the inclusive dates of the assignment and bonus target amount, which will be used as part of bonus calculation.
• Eligibility file - identifies which bonus plan the employees in Employee History data file belongs.
• Bonus plan - is the incentive program the company is offering, there can be multiple incentive programs in one variable pay plan.
• Business goals - are the objectives laid out by the company typically measuring profits and revenues against a given target.
• Goal weights - some goals are more important than others, and assigning weights to each business goal indicate how goal payouts will be calculated.

A complete diagram of the Variable Pay planning process is available in the SAP Best Practices Explorer: https://rapid.sap.com/bp/

• Each Variable Pay cycle is represented by a Variable Pay program.

• It is configured in the Admin Center.

• All configurations are stored in an XML document within Provisioning.

• Each Variable Pay program must have a unique Variable Pay Objective Plan template uploaded.

The Variable Pay form is generated based on manager hierarchy (standard, second manager, or planner). The Variable Pay form features the following:

• List of the manager’s reports with bonus target amount and calculations

• List the assigned bonus plan(s) for each employee

• Budgets (Forecast, Modeling, and/or Results)

• A route map for Variable Pay form approval

• Three main sections (Entry Level, Employee History Data, and Calculation)

The entry-level section displays:

• Single-line overview of each employee’s bonus payout

• Rollup of the bonus calculation

• Managers adjust individual payout (if allowed)

• Admins add and arrange columns using Column Designer

The fields are Individual Target, Business Target, Total Target, and/or Team Target, and the respective calculated payout.

Performance rating and guidelines are used to modify the Individual/Team payout.

Override is used to override the final payout based on role permission (manager, second manager, admin, and so on). The final payout is the final calculated bonus for the employee.

Custom fields can be added to display data from a calculation or a user data file.

The Variable Pay Details section is accessed by clicking on the vertical ellipsis on the form.

• Comprised of the Employee History Data and Calculation sections.

• Displays plan name and employee information.

• Calculates the Bonus Payout for the Business Goals.

• Displays the Individual and/or Team Goal results (Achievement % or Rating).

The Employee History section displays:

• Data including bonus target, bonus target percent, start/end dates, salary from the Employee History Data file.

• Contains the fields used to determine eligibility.

• Employee History fields can be hidden.

• Supports assignment level custom fields.

• Field types which can be added in the background element:

  • Eight Integer fields (whole numbers)

  • Eight float fields (decimals)

  • Three date fields

  • 20 text fields

The Calculation section includes:

• A mix of business, individual, and/or team goals sections that are used to calculate the final bonus payout amount.

  Each of these can have a payout weight (additive formula).

• The business section can display minimum, target, and maximum goals used to calculate payout based on the actual results.

• Individual and team sections use Performance Management forms overall/calculated rating or goal achievement percent. Guidelines and/or manager discretion is used to calculate payout.

• Supports Assignment Level Custom Fields (ALCF).