Defining Guidelines for the Compensation Plan


After completing this lesson, you will be able to:

  • Define guidelines for a Compensation plan
  • Add a rating source to a Compensation plan
  • Create guidelines for a Compensation plan


Guidelines help planners standardize increase across the organization.

They provide the system with rules on how much of an increase planners can give to employees based on certain criteria. If a planner is outside of those guidelines, the system can be set to warn or disallow the submission.

Guideline matrixes or tables can be created in the Admin Center. Navigate to Plan SetupPlan DetailsGuidelinesCreate New rule.

Guidelines can also be edited offline using the import / export functionality.

The Guidelines page contains a list of existing guideline rules.

  • Each one of these rules applies to a different compensation program (Type)

  • Within each rule are a series of formula

  • Each rule has its own criteria and settings

It is possible to create a guideline model to fit a target budget. A topic on compensation modeling is discussed later in this unit.

Formulas Within Guidelines

A guideline formula defines the minimum and maximum recommendation for each compensation program.

  • Each formula requires a unique name.

  • Guideline rules requires a criteria. In this example, it's job level. It means the minimum-maximum amount of stock to be recommended depends on employee’s job level.

  • Guidelines support five data points (minimum, low, default, high and maximum). Min, Def, Max are required by default.

  • Low and High can be used as soft limits.

Guideline Creation Process

It is important to understand how to create and modify guidelines.

These values can be edited directly in the Admin Center. However, they can also be created in a CSV file and imported.

This is how the same rule4stock looks in a CSV file. As you can see, all of the same elements are there. Importing details are in the SAP SuccessFactors Compensation Implementation Handbook.

Adding guidelines is done by first adding a rule and then adding formulas to that rule.

In the Admin Center, complete the following steps:

  1. Navigate to Plan SetupPlan DetailsGuidelines.

  2. Select Add New Rule or click the Rule Name to modify an existing rule.

Rules Settings

  • Type: Select the appropriate options for Type from the dropdown menu. It lists the different compensation programs for which you can create guidelines, including:
    • Merit
    • Promo
    • Extra
    • Extra2
    • Lumpsum
    • Lumpsum2
    • stockUnits
    • stockOption
    • stockOther1
    • stockOther2
    • stockOther3
  • Rating: Employee's performance rating is considered during the calculation.

    To differentiate unrated from too new to rate, use -1971 as the rating value in the guideline formula.
  • Benchmark Guideline: Based on the employee's range penetration or compa-ratio.

  • Job Level Current: Job level affects the guideline.

  • Pay Grade: Current pay grade affects the guideline.

  • Budget Group: Guideline applies to a specific compensation group.

  • Custom Field: A maximum of three custom fields can be created to be used as a guideline. Custom fields must be created in the same worksheet tab where the guideline type is located.

    Example: Promo type is on the Salary tab; the custom field must also be created in the Salary tab of the Design Worksheet/Column Designer.

    Commonly used criteria are Performance Rating, Location, and Range Penetration. Rating is typically used for merit. Use of Range Penetration (benchmark) is common to recommend more dollars to lower paid, higher performing employees.

  • Mode: Determines how the value is going to be calculated – Amount or Percentage. Amount is generally for stock allocations, percent is generally for merit, promotion, and so on.

  • Hard Limit:
    • If Yes - the manager cannot go outside the values defined

    • If No - the manager is allowed to set a value that is not within the range, but a warning will be issued

  • Prorating:
    • If Yes, guideline values will follow how proration was set up in the system.

      Example: Karen Smith‘s job level normally has a merit guideline range of 2-8%; however, she was hired half-way through the year and is subject to 50% proration. As a result, her guideline will be prorated as 1-4%.

    • If No, in the example above, the guideline range for Karen remains at 2-8%.

    • Prorating is commonly used for merit and not for other components.

  • Force Default on Rating Change: Applied when a performance rating is changed.
    • If Yes, the custom field acts as a driver for change, much like forcing the default upon a performance rating change, the default guideline will populate the worksheet.

    • If No, the guideline value will remain the same even if the custom field is updated. The same concept as selecting this option for forcing the default after a rating change.

  • High/Low Action: If set to warn, high and low values will be required in the formula guidelines. Planners will receive a pop-up message when they reach the high-low values. When using high-low, typically the min and max values are not displayed in the worksheet.


There is a field available for you to leave notes as a reference.

After the guideline settings are saved, click the new rule name to add the formulas.

Remember that formulas can be added manually in the Admin Center (using Add New Formula) or by importing a CSV file.

Compensation Groups and Guidelines

Groups can be created for guidelines. A subset of employee demographic can be grouped together to receive similar guideline formula. Employees can be grouped however it makes sense for the customer.

Sometimes compensation groups are used to group employees by:

  • Country

  • Job level

  • Equity eligibility level

  • Or any custom grouping defined by the customer

Consider this example: The customer has merit guidelines based on performance review rating and business units.

  • Employees in the retail division have a merit scale of 4% to 6%.

  • Employees in the sales and marketing division have a merit scale of 5% to 7%.

In this example, you would create a group called "Retail" and another group called "Sales and Marketing".

Compensation groups do not update dynamically when an employee changes groups. For example, if an employee transfers from one division to another, their compensation group would not automatically update. For this reason, compensation groups can be an administrative challenge to manage. The administrator should update group memberships often if they plan to update data throughout the compensation cycle.

At this point, create guidelines based on the attributes of Performance Rating and Budget Group.

Considerations for Creating Guidelines

Select the Enable Guideline Optimization checkbox to improve system performance if the customer has many compensation guidelines. Although this checkbox can be selected for any number of guidelines, it is required if your customer has over 1,000 guidelines. It is enabled by default.

Catch-All Formula

A catch-all formula is usually created to ensure employees that do not fall into the preceding criteria still gets a guideline range. The order in which you arrange your formulas is important. The tool goes through the list starting with the first formula. Once the first formula is met, it will not go through the remaining formulas. This makes the position of the catch-all formula at the bottom/last all the more important.

Create Guidelines Without Gaps in the Ranges

Create guidelines without gaps in the ranges:

  • Make the numbers for the top of the range and bottom of the range for next guideline the same to ensure there are no gaps.

  • The system calculates out to more than one additional decimal place.

  • TRUE means the guideline includes the number, and FALSE means that it does not include that number.

Default Versus No Default Amount

When companies use all five data points (min, def, max, low, high), the common practice is to set low and high as soft limits. Hard stops on min and max.

  • No default is better for small teams where all members are on single page

  • Default is better for large teams

Complete guideline configurations are in the SAP SuccessFactors Compensation Implementation Guide.

Guideline Warning Messages

The second warning message also includes a warning message for force-comment.

Rating Sources

The SAP SuccessFactors Performance Management solution can be integrated with SAP SuccessFactors Compensation in order to share data.

Rating Basics


Note that the SAP SuccessFactors Compensation solution only pulls data from Performance Management and not from Goal Management.

At the most basic level, a rating is an evaluation of an employee’s performance. A rating can come from any number of places:

  • Performance Management Ratings: A rating pulled from a PM form or imported from an outside system.

  • Compensation Rating: A rating manually selected from within the compensation worksheet.

  • Employee Profile: A rating configured in the employee profile.

The SAP Successfactors Compensation Implementation Guide has complete instructions for all of these scenarios. However, instead of reviewing these steps, let's get a little more background about each method.

Sources Overview

Employee ratings enter the system in one of the following ways:

  • The system pulls ratings by integrating with SAP SuccessFactors Performance Management.

  • An employee’s manager inputs a manual compensation rating into the system.

  • The system pulls in ratings from a PM form but has the ability to have a manual compensation rating added.

  • Customer imports rating from a third-party system.

  • System pulls data from Employee profile.

Source - SAP SuccessFactors Performance Management

The system pulls ratings by integrating with SAP SuccessFactors Performance Management:

  • Used when the customer has implemented SAP SuccessFactors Performance Management and has reviews/ratings that they wish to use in the compensation planning cycle.

  • Most common method for acquiring ratings.

  • Adds a hyperlink to open each employee's Performance Management review form directly from the compensation worksheet.

  • In order to use this method, the rating source must point to the correct Performance Management form.

Ratings are commonly displayed as text, which has a more meaningful impact than numbers.

Source - Manual Rating

An employee’s manager can input a manual compensation rating into the system:

  • Used if a customer doesn’t use the SAP SuccessFactors Performance Management solution or (if it is their first year using it) they do not have any forms in the system.

  • Manual rating is accomplished by adding the Comp Rating field in compensation template and assigning a rating scale in the XML template.

Source - Combination

The system pulls in ratings from a Performance Management form and has a manual compensation rating:

  • This method is not common practice.

  • This requires the system to look for a form with a Performance Management rating. If a rating is not found, it allows the manager to manually attach one to the employee.

  • This is a good approach to take when not all employees have PM forms, but still need to get a merit increase that is driven by guidelines.

  • Add the standard pmRating and compRating fields to the compensation plan template.

Source - Third-Party System

The customer imports rating from third-party system:

  • Used if a customer has a third-party system.

  • The third-party system must track ratings.

  • Ratings are loaded via the employee import file (user data file).

  • The import key defines the field in the import file that will be used to populate the rating.

  • Scale defines the rating scale that the imported rating will use for display.

  • Guidelines can also be driven by these ratings.

Source - Employee Profile

Some companies have eliminated performance ratings in their employee evaluation processes. While employees may no longer have a formal performance rating, there is often a need to use other evaluation methods as the basis for compensation decisions.

The Employee Profile offers 6 rating types: 4 standard and 2 custom (Performance, Competency, Objective, and Potential).

Although similar to the existing Comp Rating, the Employee Profile ratings are integrated with both Calibration and Succession solutions, and provide the flexibility needed to enter a manual rating once, and use it for the SAP SuccessFactors solutions: Succession, Calibration and Compensation.

Make sure that Scorecard is enabled in the Employee Files layout.

Rating information can be imported through extended user information.

Information Type: Trend Information

Addition of Rating Sources to a Compensation Plan

It’s important to understand how to add a rating source to a compensation plan.

  1. Navigate to Plan SetupPlan DetailsRating Sources.

  2. Select Add New Rating Source.

  3. If using the Performance Management Form:
    1. Choose the form name.

    2. Specify if the form should be completed.

    3. Specify if calculated rating.

  4. If you are importing ratings from a CSV file, indicate the Import Key.

  5. Choose the rating scale to be used.


Only one rating source and type for each pay component, either the PM form or the Employee Profile.  For instance, if an Employee Profile rating is used for salary, then PM templates may not be used for salary.  If the admin selects All in the Use For dropdown, then either the Live Profile or PM templates may be selected, but not both.

Rating type only needs to be selected if No was checked for the Use Calculated Rating field. Otherwise, the rating type setting will be ignored.

  • Default: Use this rating type to pull the default rating from the performance review. In most cases, this is the same as the overall performance rating.

  • overallCompetency: Use this rating type to pull the overall competency rating in objcomp-summary-section of a performance review form.

  • overallObjective: Use this rating type to pull the overall objective rating in objcomp-summary-section of a performance review form.

  • overallPerformance: Use this rating type to pull the overall performance rating from a performance review form. Note that this is the most commonly used rating type.

  • overallPotential: Use this rating type to pull the overall potential rating in perfpot-summary-section of a performance review form.

If Too New to Rate in Performance Management is used and customers would like to reflect the same rating in Compensation worksheets, the rating type CANNOT be Default; otherwise, the rating will be reflected as UNRATED.

Linking Forms

If linking multiple performance management forms, ensure that only one form is set as the default.

It is not recommended to set Completed Only to Yes. Customers may not have all their Performance Management forms completed before compensation forms are (re)launched.

If a customer uses an imported rating, change import key each year.

Ensure the ID is updated based on the form instance (the ID can be different in test and production environments).

XML Rating Sources

When an employee has multiple performance reviews, the system will use the checkRatingSourceAcrossTemplates tag in the XML to determine the behavior.

  • If the attribute is set to TRUE, the compensation template will pull the latest performance rating from the most recent performance review.

  • If the attribute is set to FALSE, the compensation template will start with the first defined rating source to look for the performance rating. If no form is found for an employee from the first rating source on the list, it will check for the next rating on the list.

In the Admin Center, the Comp Rating field is a dropdown menu – disable it if a performance management rating exists.

Adding Rating Source When Using Employee Profile

If using Employee Profile:

  • Choose which rating type to use
    • Supports all 4 standard (Competency, Objective, Performance and Potential) and 2 custom

    • Values shown in the dropdown are configured in the data model-background element

  • Effective date
    • If the effective date does not fall between any of the start and end dates, the system returns N/A.

    • In the case of multiple ratings on the same date, the system takes the last modified.

Guideline Models for Compensation Plans

Compensation Modeling allows customers to perform complex calculations and analyze how base salary and equity should be awarded to employees across locations, performance levels, position in range and so on.

Compensation Modeling

For example, a customer might want to:

  • Model the cost of incorporating salary survey information on competitive market increases by country, industry, and job classification.

  • Have firm targets in place from a works council, union, or the finance department.

  • Measure the impact of adjusting pay guides or updating exchange rates.

An integrated modeling and planning helps customers with a number of benefits, such as:

  • They can eliminate the need for Microsoft Excel spreadsheets.

  • They can get access to your organization’s wide data for more holistic planning.

  • They can drill-down and roll-up at desired level of granularity.

  • They can also create new compensation templates based on the best chosen model.


  1. Enable the Enable Generic Objects and Enable Attachment manager options in Provisioning.

  2. Enable the relevant role-based permission for Comp Admin.

Steps for Creating a Compensation Model

  1. Select any compensation source plan and select Copy.

  2. Enter the name and new dates for the copied plan. The system will use the new plan as the base template for the modeling program.

  3. From the newly created plan, click Guideline modeling.

  4. Click Add new model.

  5. Select the field from the dropdown (these are the existing guideline rules in the template).

  6. Enter a name and description. Click Next.

    The system will use the compensation source template for rating information, and the new plan template for eligibility rules, pay guides, guidelines, currency and exchange rates.

  7. Set total targets.

    • Targets can be set as a benchmark for the overall guideline cost, and also for individual targets for the overall plan. You can set target by amount or percentage.

    • When you mouse over on the target information, you get details on the base amount, total amount, actual and assigned amount.

  8. Individual targets: This must be one of the guideline attributes in your new plan template. For instance, if guidelines are based on country, position in range, and rating, then you must select one of these three attributes for individual targets.

  9. Click Create.

Compensation Modeling: Guideline Model System

The guideline model system displays the following:

  1. Areas that require attention such as a guideline exceeding the target, employees below the range, and so on

  2. Recommendations

  3. Guideline matrix with corresponding costs

Once the model is created, you can review and change your guideline model setup and also adjust individual values.

The system will suggest ways such that the guidelines can be aligned with the targets.

When you accept the system recommendation, the guideline values on the affected rows are increased or decreased proportionately.

When targets are met, you can push any model to a live template.

  1. Navigate to Admin Center.

  2. In the Tools Search field, type Go to Compensation Home.

  3. Click Guideline Modeling from compensation home.

  4. Select any model and click Push to Live Template. If you select push to live of a program that has already been published, all guidelines will be overwritten.

Create and Add Guidelines to a Compensation Plan

Business Example

You need to adjust the guidelines to set minimum and maximum recommendations.


  1. Edit the guideline for Adjustment.

    1. Navigate to your template by clicking Plan SetupPlan DetailsGuidelinesAdjustmentTake ActionChange Rule Settings.

    2. In Formula Criteria, select Rating and BenchmarkCurrent Position in Range.

    3. Save.

    4. Click the rule name to enter the formula.

    5. The criteria is meant to look for those with top ratings but at the bottom of the Position in Range to get the highest increase. Set the formula as follows:

      Formula NamePerformance RatingCurrent Position in RangeMax (All other values are 0)
      F1<=2 0
      F2>2 to <4<=100.5
      F4>2 to <4>100
  2. Create a test worksheet.

    1. Navigate to Manage WorksheetsCreate Worksheets.

    2. Enter the worksheet name (any preferred naming convention).

    3. Enter start, end, and due dates.

    4. Enter Carla Grant as Head of Compensation Planning.

    5. Select Create for Head of Planning only check box.

    6. Click Launch Plan.

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