Have you ever wondered what SuccessFactors Variable Pay is and if you need it? Do you need Variable Pay when you already have Compensation implemented? How is Variable Pay different from Compensation? Do you need Employee Central to have Variable Pay?
As the name suggests, Variable Pay is the type of compensation that varies, whereas salary is paid in equal proportions throughout the year. Variable Pay follows a formula based approach to determine employees rewards, based on their contribution towards a company’s growth and profitability. This allows a Transparency in Pay, which according to a recent study is top of mind for many employees.
SuccessFactors Compensation facilitates planning and administration of salary component by managers and compensation administrators. Whereas Variable Pay facilitates planning and administration of Bonus Pay that includes complex calculation of business performance and employee performance. It is not necessary to have Employee Central to implement Variable Pay. In order to get employee data in Variable Pay we can have integration with Employee Central or can import data directly into Variable Pay programs (if Employee Central is available) or can use a hybrid approach, where some of the data comes from Employee Central and some is directly imported.
Benefits of Variable Pay
1. Forecasting Functionality: It provides forecasted Variable Pay results for all or part of the organization at any point in time. Forecasted results help the compensation administrator compare the annual bonus payout with the accrued bonus expense before the actual payout and address any ‘what-if’ situations. A forecast is produced in both graphical and tabular format to make it more actionable for the reader and empower the business towards strategic decision making. Forecasted results improve financial planning and administrative efficiency.
A forecast can be viewed department wise, division wise, location wise or Job code wise.
2. Proration of Payouts: Variable Pay calculates incentives based on employee’s performance. It provides the ability to prorate incentive awards when an employee is engaged in different assignments during an evaluation period. This provides a better correlation between Performance and Pay.
Let’s see an example here:
|John||Inventory Manager||1/1/2017 – 9/30/2017|
|John||Logistics Coordinator||10/1/2017 – 12/31/2017|
Here John is involved in more than one bonus plan in a year.
There can even be a complex scenario where an employee is working on more than one assignment simultaneously, and is thus involved in more than one bonus plan throughout the evaluation period.
This can be a tremendous administrative burden for the compensation professionals.
SuccessFactors Variable Pay eases this burden by:
- Considering employee’s date effective historical records.
- Determining who is eligible for which bonus plans during which timeframes.
- Prorating the payouts for each bonus plan.
|Inventory Management Plan||75%|
3. Budget for discretionary component: Variable Pay offers the ability to budget and track incentive plans, which allows managers to monitor and manage spending and costs. It results in improved budget management, increased administrative efficiency and reduced costs.
There are various options to calculate the budget spent, it can be as a percentage of forecast results,
Or as a percentage of Actual Results
Or by any other parameter.
So, if you are looking for a corporate-wide employee compensation management solution for a transparent, well planned and fair Bonus Pay that enables well informed strategic decision making, SuccessFactors Variable Pay is the thing!