Variable pay is a non-recurring employee compensation which varies as compared to salary which is paid in equal proportions throughout the year. It is used generally to recognize and reward employee contribution toward company productivity, profitability, team work, safety, quality, or some other metric considered important by the organization.
In SAP SuccessFactors, Variable Pay is an end-to-end solution for a streamlined bonus planning and payout process for both large and small organizations. Variable Pay facilitates the administration of complex variable pay programs that include quantitative business performance and employee performance measures.
- Forecasting Functionality
Variable Pay allows you to model and forecast. This is beneficial when incentive projections/accruals are due throughout the year and for forecasting ‘what if’ scenarios. Once the program is configured, the Compensation Administrator can easily change the forecasts, run the calculations, and provide a report out on estimated incentive costs.
- Proration of Payouts
Variable Pay provides the ability to pro-rate incentive awards. This is beneficial in recognizing participation across multiple bonus plans during the performance period and/or recognizing changes in incentive target or salary. Proration of awards can be based on assignments (multiple bonus plans) and drives pay for performance – it ties performance in each assignment to an award based on associated goals and achievements. Additionally, cost savings may be recognized through pro-ration of incentive targets and/or salary changes throughout the year.
- Budget for Discretionary Component Only
Variable Pay offers the ability to budget and track incentive plans, which allows managers to monitor and manage spending and costs.
Incentive Programs SAP SuccessFactors Variable Pay Does Not Support:
- Sales Incentive/Commission program
- Point value proxy systems
- Non-cash bonus systems
Variable Pay
Throughout this training, you will be presented with terms that are specific to SAP SuccessFactors Variable Pay. Before discussing SAP SuccessFactors Variable Pay in more detail, it is important that you become familiar with these terms. The following table lists the terms and definitions associated with SAP SuccessFactors Variable Pay.
| Term | Definition |
|---|---|
| Variable Pay Plan | Also known as the Variable Pay Template, which holds all the settings of each variable pay cycle. All configurations are stored in an XML document or template. This should not be confused with bonus plan. The VarPay plan is the actual cycle template while bonus plan is the incentive scheme for employees. Variable pay templates can have multiple incentive employee programs. |
| Employee Demographic Data | The standard data set imported into the system by user import. |
| Employee Compensation Data | The additional data imported into the system for compensation purposes (for example: current salary, pay grade, and so on.) |
| Employee Historical Data | The additional data imported into the system for employee bonus purposes. This data may contain one or more record per employee. This data is very customer-specific; it includes bonus target (basis) as well as eligibility-related data. |
| Assignment | The association of an employee to an incentive plan for a specific time interval. This assignment is determined by applying the plan eligibility rules to the employee historical data for each bonus plan and employee. Note It is possible for an employee to be eligible for more than one incentive plan per time period and thus occupy two or more assignments at once. An assignment is also created when the target changes or when the goal results they are tied to change. |
| Assignment Proration | The fraction that represents the portion of the employee's time in the assignment over the total review period. For example, if the review period is 365 days and the employee assignment for a particular incentive plan is 182.5 days, then the assignment proration would be 182.5 days/365 days = 0.5. |
| Basis | This is the Target Bonus opportunity. It can be imported as local currency, but can only be stored as functional currency. |
| Bonus Plan | Defines the section weights and caps of the bonus scheme. |
| Business Goals | Objectives specific to business performance. Usually revolves around revenue and operating profit. |
| Business Goal Weight | Weight assigned to a goal in the bonus plan. Each goal is weighted in relation to the other goals in an assignment. Per default, the sum of all goal weights in an assignment must be 100%. The goal weight is multiplied by the assignment target amount to determine the goal basis. |
| Exception | An occurrence when the employee history data in the system is replaced by employee history data imported by the administrator. |
| Override | An occurrence when parts of the calculated bonus data are replaced by values manually inserted by the administrator. |
| Bonus Cap Percent | A percentage defined at bonus plan level that represents the maximum bonus allowable for that bonus plan assignment. The application multiplies the bonus cap percent by the assignment target amount to determine the bonus cap amount. |
| Bonus Cap Amount | A percentage defined at bonus plan level that represents the maximum bonus allowable for that bonus plan assignment. |
| Bonus Calculation | Used to initiate the calculation of final payout from the Business, Individual, and/or Team sections before form creation. |
| Achievement Payout calculation | Determines the payout percent for each goal. Calculation method includes:
Note The calculation is defined in the Business Goals file and determination of which method to use during implementation stage by the partner consultants. |
