In earlier blog posts I walked through setting up and enrolling an employee in a Fixed compensation plan (Fixed compensation setup and enrollment (Part 1 in a series)) and processing new compensation amounts for employees (Compensation processing (Part 2 in a series)). In this blog post I will walk through the Performance functionality as it relates to compensation.
Setup
In order to use the Pay for performance feature in compensation processing, first go to the HR parameters (HR > Setup > Parameters > Human resources parameters) and in the Compensation tab, make sure the Rating source is set to Compensation. This will ensure the employee performance ratings are given using the performance ratings from compensation instead of the competency ratings used for assessing skills.
Next, create Performance plans: HR > Setup > Compensation > Performance plans. Performance plans are basically a named rating model. Later you will choose which ratings you want to use in your performance plan and what allocation each rating should get in that performance plan per Department.
Next, create Performance ratings: HR > Setup > Compensation > Performance ratings. Ratings can be used by multiple performance plans. Ratings can be expired as the company's rating system evolves over time. The combination of the rating and the plan is assigned to an employee as his/her performance score to determine how their performance will impact their compensation.
Pay for performance allocations (HR > Periodic > Compensation > Pay for performance allocations) bring together the Performance plan, Performance ratings, and the Department to determine how compensation pay should be adjusted for each rating for a given department.
Click on the Fixed pay matrix and Variable award matrix buttons on the Pay for performance allocation to specify which Performance ratings will be used by that Performance plan and what the impact of that rating should be on an employee's compensation. In the example below, an employee in the Operations department who gets a 1 as their performance rating will receive 120% of their target merit increase.
Record employee performance
Performance ratings are assigned to employees by selecting the employee on the HR > Common > Workers > Employees list and clicking the Compensation tab > Performance button to open the Employee performance form. Note that the compensation buttons will only be enabled for the employees who are actively employed in the signed in Legal Entity. Performance is recorded by selecting the Performance plan, then the Performance rating, and setting the Period Effective and Expiration dates to the time period evaluated.
Process employee compensation
Once the Performance plans, Performance ratings, and Pay for performance allocations have been set up and Employee performance has been recorded, the compensation process can be run as normal. See blog post Compensation processing (Part 2 in a series) for detailed information on processing compensation. To factor the employee's performance rating into the compensation calculation, make sure to mark the Enable pay for performance checkbox on the Setup form on the Process event.
After the Process event has run, the Infolog shows that the 120% performance factor for June's performance rating was taken into effect while calculating her merit compensation action.
This blog series was started based on feedback from readers like you! Have other topics you would like to see covered in this blog? Please let us know in the comments section below!