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Archive for the category “SAP Enterprise Compensation Management”

12- Managing Year-Round Off cycle Bonus

Employees are compensated year round over and above their normal remuneration as a token for their work, as a motivation, as a compliment for their achievement, etc…

In this chapter, we will see how the ECM takes care of year round off-cycle bonus awards. We will follow a similar approach that we have taken in previous chapter to go through the process.

We will consider the generic off-cycle process for Recognition programs that most companies have. One has to do a cost-benefit analysis of managing this program using ECM. The cost of additional plans must be weighed in against the potential advantages of having a streamlined process of managing these programs.

12.1   Setup the budget

We will setup a separate budget for recognition reward. It will a monetary award.

 

Figure 12.1   Setup budget for recognition rewards

12.2   Setup the Compensation program

We will create a new compensation plan for recognition rewards that is of ‘Off-cycle bonus’ category. Also note that we will create a similar compensation plan for any other recognition award that we want to capture separately.

 

Figure 12.2   Setup compensation plan

The pay increase can happen anytime. Hence we will create an anytime recognition reward review.

 

Figure 12.3   Setup compensation review

We will create a compensation review item ‘Recognition rewards’ using the compensation plan ‘Recognition reward’ and the anytime compensation review ‘RERE’.

 

Figure 12.4   Setup recognition reward review item

The compensation review item attributes for Pay increase are defined in the screen Figure 12.5

 

Figure 12.5   Setup recognition reward review item in details

12.3   Setup the eligibility

Anyone in theUSis eligible for recognition reward. In this case the macro eligibility is sufficient. That means that anyone with the compensation program record with compensation area 10 and first grouping of ALL and second grouping of ALL are all eligible. There is no need to define micro eligibility using eligibility rules.

12.4   Setup the guidelines

We don’t need any elaborate guidelines since the recognition reward is for $100. We don’t need to create any guideline matrix. We will enter default, minimum and maximum as $100. We will create similar guidelines for all the guideline groupings.

 

Figure 12.6   Setup compensation guidelines

12.5   Setup the award Off cycle Bonus (IT 267)

We will define the compensation plan attributes along with the guideline variant. The absence of eligibility variant will make the macro eligibility as the only eligibility criteria

 

Figure 12.7   Setup compensation plan

We will also setup the compensation plan payroll data with the off-cycle reason of ‘Special Payment’.

 

Figure 12.8   Setup compensation payroll data

It’s very important to include it in the compensation program as shown in Figure 12.9

 

Figure 12.9   Setup compensation program

Create the budget and setup the budget amounts

 

Figure 12.10   Setup budget amount

Assign the budget to the highest unit. If anyone is given recognition reward and who is under the ExecutiveBoard-USAhierarchy will reduce the budget even though the budget is assigned to the highest level.

 

Figure 12.11   Setup budget release

When you apply the guidelines, $100 will be awarded. For this particular plan, there are just too many columns and don’t really help. The user can easily reduce the number of columns by clicking on the ‘Personalize’ button and removing redundant columns.

 

Figure 12.12   Personalization options

Awarding the employees

The manager comes in to do the pay increase and can pick a view to see only the directly subordinate employees.

 

Figure 12.13   Select the employee

The manager can apply the guidelines and award $100.

 

Figure 12.14   Grant the award

The award is reviewed and send for approval.

 

Figure 12.15   Submit the award

The initiator of the award and provide notes that helps the approver.

 

Figure 12.16   Add a note

Once the award has gone through the approval cycle and it’s in the approved state, the compensation specialist proceeds to execute the compensation process status change transaction. In this case it might also be done on a regular monthly basis. All the awards in the approved status will be changed to Active status.

 

Figure 12.17   Activate the award

The compensation process record IT 0759 is shown below Figure 12.18

 

Figure 12.18   Award in infotype 0759

On activation, the additional off-cycle payment infotype 0267 is created with the amount, effective date and reason for the payment.

 

Figure 12.19   Off-cycle infotype 0267

As awards are distributed, you can review the amount spent when you execute the transaction.

 

Figure 12.20   Check the budget

For the New Year, you can copy the existing budget and create a new budget. The new budget has all the features of the old budget including the budget amount.

 

Figure 12.21   Create a new budget structure for the next year

12.6   Summary

In this chapter, we have covered the creating of recognition rewards program. We have also created a budget for the new year based on the previous year’s budget. We have also created a fixed guideline for the budget that can’t be changed.

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11- How to manage Year-Round Basic Pay increase

There are changes to compensation an employee receives round the year. Manage year-round basic pay increase with the same rigor and process that goes with year-end processes.

The objective of this chapter is to go further away from the traditional approach to compensation into the new approaches to compensation. The traditional approach to compensation includes the year-end processes only but we will also include the year round basic pay increases. This will give the framework of maintaining different components of an increase much more organized and not losing the line items of an increase.

The year round basic pay increases include promotion, transfers, equity adjustments etc… These processes are traditionally managed by the HR specialist unlike the comp processes that are managed by Compensation Specialist. As systems become more integrated, they offer an opportunity for compensation specialist to become a part of all compensation processes. As compensation processes get integrated, it will also impact the budgeting process. The year-end processes budget and year-round processes budget might become integrated too. During a tough economy it might be required to cut down on bonus and year-end merit increase but we might need to continue with other employee movements like promotion, etc. as a part of talent management processes. On the other hand, in a good economy, it might be required to have higher bonuses and merit increase just to keep the existing staff and be aggressive in promoting people along with talent management processes.

I am taking a more holistic approach to compensation that focused on administration of that pot of gold. Whether it’s spent during the year or at the end of year, compensation will be accountable for it. The role of HR generalist is going to transform into more strategic role and compensation will have to pick the slack on year around compensation impacting processes.

We will setup one budget for pay changes dues to movements. There is always the opposing side about why should we do this. The thing is why we shouldn’t do this. We have excellent compensation functionality to really capture the details that would otherwise not be possible to capture with standard SAP infotypes. We can capture the line items of the increase on the compensation side and give the overall increase in IT 0008. We can only update 0008 once a day or basically override anything that has the same begin date. Hence we really can’t have 2 pay increases in the same day. The pay increase could be promotional increase and equity adjustment. Compensation captures these 2 and IT 0008 captures the total one time increase.

11.1   Setup the budget

We will setup a specific budget for year-round pay increases. This will help in keeping a tab on all the year-round pay increases.

 

Figure 11.1   Setup year-round budget type

We don’t need to specifically create new budget periods if we can use the existing ones.

 

Figure 11.2   Use the existing budget period

This is the basic configuration for budgeting. We will come back to more transaction budgeting need later.

11.2   Setup the Compensation program

We will create a new compensation plan for Pay increase that is of ‘Salary adjustment’ category. Also note that we will create a similar compensation plan for any other year round award that we want to capture separately. We will create one for Equity Increase.

 

Figure 11.3   Setup compensation plan

The pay increase can happen anytime. Hence we will create an anytime pay increase review.

 

Figure 11.4   Setup an anytime compensation review

We will create a compensation review item ‘Pay increase’ using the compensation plan ‘Pay increase’ and the anytime compensation review ‘PAYI’. We will similarly create compensation review item for Equity adjustment as shown in Figure 11.5

 

Figure 11.5   Setup the compensation review items

Figure 11.6 defines the compensation review item attributes for Pay increase.

 

Figure 11.6   Setup pay increase compensation review item

We will also setup the compensation review item for equity adjustment. The important thing to note is that we will use the same budget. What it would mean is that whether we give an employee a pay increase or equity adjustment, they will added to the same budget.

 

Figure 11.7   Setup equity compensation plan review item

11.3   Setup the eligibility

We will now setup the eligibility rules using the variant for pay increase along with the eligibility grouping that has already been setup for this compensation area.

 

Figure 11.8   Setup eligibility rules

The executives have to wait for 1 year before they become eligible for pay increase and the salaried employees have to wait for 2 years before they become eligible for a pay increase. The executive eligibility is shown in Figure 11.9.

 

Figure 11.9   Eligibility rule for executives for pay increase

The eligibility for other groups of employees including the Salaried and others is set to 2 years.

 

Figure 11.10   Eligibility rule for salaried employees for pay increase

This lays out simple eligibility rules. We can make them as complex as we want using all the available options.

11.4   Setup the guidelines

Each compensation plan can have separate guidelines.

 

Figure 11.11   Setup guideline variant for pay increase

We already have the guideline groupings defined for the compensation area. We have to use them.

 

Figure 11.12   Using existing guideline groupings

We would continue to use the guideline groupings based on the decision tree.

 

Figure 11.13   Using the existing guideline grouping feature

11.5   Setup the award for Basic Pay (IT 0008)

We will define the compensation plan attributes with align the eligibility variant and guideline variant that we have already created.

 

Figure 11.14   Compensation plan attributes for pay increase

We will do the same for equity increase. In this case, we would choose to use the same eligibility variant and guideline variant as we have used for pay increase.

 

Figure 11.15   Compensation plan attributes for equity increase

We will also setup the compensation plan payroll data to calculate on the basis of ASAL (calculated wage type for annual salary)

 

Figure 11.16   Compensation payroll data

It is also important to include this plan as a part of compensation program. It will make all the employees defined in the compensation program eligible.

 

Figure 11.17   Compensation program includes Pay increase and Equity increase

The first step will be to create the common budget for pay increase and equity increase plan. The budget will be created for just one level meaning that there is only one budget unit. All the awards will be assigned to just pot of money. This is unlike what we have created for year-end plans where each manager was managing towards a budget.

 

Figure 11.18   Create budget for pay increase

With just one budget unit, it will be easy to allocate the money.

 

Figure 11.19   Budget units for pay increase

We will assign a common budget amount of $1,000,000 for the complete organizational hierarchy under Executive Board US. We can also change the name of the budget unit to ‘Pay increase budget for theUS’.

 

Figure 11.20   Budget set for the organization

Awarding the employees

The manager comes in to do the pay increase and can pick a view to see only the directly subordinate employees.

 

Figure 11.21   Selection for employees

The manager gives an equity adjustment of 4% ($21,120) and then moves to the pay increase. The screen Figure 11.22 shows the budget used and the new salary.

 

Figure 11.22   After equity increase

Now the manager gives a pay increase of 5% ($26,400) bringing up the new salary to 575,520 and reducing the common budget.

 

Figure 11.23   Pay increase

Review the award after making both the adjustments. The percentage increase in both the cases is applied to the base amount of 528,000 and is not on the cumulative new salary. The total amount is deducted from the same budget as planned.

 

Figure 11.24   Reviewing the award

This award will follow the approval cycle as setup in the system. Once approvers approve the award, the compensation specialist will need to change the status from ‘approved’ to ‘active’.

 

Figure 11.25   Activating the award

The message in screen Figure 11.26 comes up with successful changes after the program runs.

 

Figure 11.26   Message after a successful activation

The employee’s basic pay before the award is shown in Figure 11.27

 

Figure 11.27   Basic pay before the award activated.

After the award is activated, the basic pay of the employee reflects the change as shown in Figure 11.28

 

Figure 11.28  Basic pay changed after the activation

11.6   Enhancement to update Actions (IT 0000)

If there is a need to update any other infotype, activate routine BAdI HRECM00_ACTIVATIO.

11.7   Summary

Many SAP HR practitioners are very aware and familiar with basic pay infotype not being able to record multiple changes that happen on the same day. The first change will be overwritten by the second change and there is no automatically add-on to the existing change on the same day. In some cases, the solution is not to create 2 increase in the same day but to make them a day apart to save some history. ECM approach can address this kind of problems. We can have as many changes as we need and capture them on the compensation side and only the final change goes to basic pay infotype. If someone wants more information and details they can check the infotype 0759.

In this chapter we have presented a different way of handling year around pay increases. We have also seen how multiple plans can use a common budget. We have also provided with the solution to capture multiple basic pay changes on the same day.

10- Managing Year-End Annual Merit and Bonus Cycle

Annual review is one of the anticipated activities for the employee to review the work done, plan for the future and reward for the present

The objective of this chapter is to work the details around the Annual merit cycle that all the companies follow. It would normally include the merit increase and bonus increase. We will further define the stock options plan in the later chapter and build on the existing plan that we define here. I will also include some of the important SAP notes so that the practitioners can refer.  Here I will also explain the configurations that are not initially covered in the earlier chapters.

10.1   Setup the budget

The first thing to start with is a budget for the annual merit and bonus. We will define 2 different budget types. We will define to budget types, AMER and ABON. This should already be available to the compensation specialist before they begin the compensation exercise. The budget types are configured once and used ever after. These budgets are monetary and available for allocation. The budget types don’t have any date based dependencies.

 

Figure 10.1   Setting up the budget type

Either every year a budget period is added and transported or they can be created all  in advance. The budget period defines the timeframe where the budget amount is used for.

 

Figure 10.2   Setting up the budget period

The annual merit and annual bonus plans budget types will both use the same period.

Each of these plans will have their own budgets. We will enter them manually.

First we will setup the budget structure for annual merit increase. We will click “Create”. We will then define the budget type, period and the organizational units which are allocated this budget. The Org unit ID column refers to the starting point in the budget structure. The depth 0 indicates all the organizational units under the org unit 00000300 should have a corresponding budget unit. The depth can be changed to create only higher level org units being financed using the budget unit. The units’ column is applicable only for non-monetary budgets like stock options. Once everything is entered, we will click “Save”.

 

Figure 10.3   Annual merit increase budget setup

Similarly we will setup the annual bonus budget structure.

 

Figure 10.4   Annual bonus budget setup

The overall budget structure will look like what’s given below:

 

Figure 10.5   Budget structure for Annual merit increase

The budget unit 50038446 finances the org unit 00000300 and so on. What that means is that if any employee in org unit 00000300 is awarded an annual merit increase, it will use the budget available from 50038466 and correspondingly cut the available budget.

Now let’s populate the budget with some amounts. We have a total budget of 145,000 and we plan to distribute 10,000 for each of the higher org units. Then we can continue to distribute it to the org units below. This is a top-down approach to budget management.

 

Figure 10.6   Top-down budget distribution

The Total budget available appears in the column „Total Budget“. The distributable budget means that it is still available for distribution. E.g. out of the total 125,000 the amount distribute to the budget units below is 80,000 and 45,000 is still available. The spend amount show 0 since no employee has been awarded the money yet.

Also note that now we are just planning hence the budget status is „planned“.

 

Figure 10.7   Planned budget

The detailed distribution can be like below:

 

Figure 10.8   Detailed budget distribution

If the budget needs proportional adjustment, we can use the percentage increase option.

 

Figure 10.9   Mass change percentage

Once we apply the percentage changes, all the values are updated.

 

Figure 10.10   Updated budget

We will create the bonus budget based on the bottom up logic. Each manager will enter their own expectation of the bonus budget they should get. In the example below, we have taken on branch of the organizational hierarchy. We would have each manager indicating the budget they want for their organization.

 

Figure 10.11   Bottom-up budgeting

Manager of Hospitality wants $5,000 for his/her org unit, manager of Operations wants $20,000 for his/her org unit excluding what the organization wants under it. Also temporarily ignore the values of the „Distributable“ column.

Once all managers have given their individual estimates, we can click on „Roll-up value“.

 

Figure 10.12   Roll-up budget values

What happens when we hit roll-up is that the manager’s required budget becomes their distributable budget and the total budget is aligned accordingly. This essentially means that the Manager of the executive board-usa has $100,000 to spend on their organizational unit and the total budget has been adjusted to include the overall budget.

Note

It is important to wait for all the managers to give their input so that when we click „Roll up“, all the values are included in the calculation. It is also important to note that if you accidentally pressed the ‘Roll up’ again, it will again move the Total budget values in the Distributable column and would distort the budget.

 

Figure 10.13   Rolling up the budget

Now let’s release the budget for awards.

 

Figure 10.14   Release Merit budget

Your will receive a message on the top if the release was successful. Sometime you might get an error message if the budget unit is locked by other users performing other activities.

 

Figure 10.15   Released merit budget

Each budget is released individually. We release the merit budget in Figure 10.15. The Figure 10.16 shows the release budget for annual bonus.

 

Figure 10.16   Released the annual bonus budget

There are times that you would like to reset the budget back to planning. This is only allowed it you have not allocated awards and used the budgets. The ‘Reset to planning’ allows you to reset the status to ‘Planned’ that in turn allows you to maintain the budget again.

There is a function to check values before you release the budget. This process helps flush out any inconsistencies in the budget amounts. It’s a good practice to check values before releasing the budgets.

 

Figure 10.17   Budget functions

10.2   Setup the Compensation program

All active employees of the company are a part of the annual review program. The annual review program comprises of annual merit plan and annual bonus plans.

We will first define the compensation program grouping. The first grouping is to group them by the country they belong to. Even if the company is just in one country, we can use country as the first grouping. We will have other opportunities to distinguish population more granular in later functionality.

There are 2 compensation groupings provided to assign compensation programs. The first compensation grouping is based on the compensation area. The compensation area is in turn defined based on the country.

 

Figure 10.18   First Compensation Program Grouping

The second compensation grouping will also be defined for the country since we are working on a just the US based employees.

 

Figure 10.19   Second Compensation Program Grouping

Once the program groupings is defined, we will now define the plans that are part of this program.

If you belong to the compensation area 10 (which is for the US), and you belong to first compensation program grouping ALL and second program grouping ALL, then you are assigned Merit Plan and Bonus Plan. It is also called macro-eligibility for merit plan and bonus plan.

 

Figure 10.20   Compensation plans in a compensation program

10.3   Setup the eligibility

The macro and micro eligibility requirements is established based on the compensation plans. If there is someone who isn’t eligible by normal plan definition but needs to be added due as exception, use override functionality.

This is configured but it also needs to be on each employee who satisfies this criteria. The infotype on employee is referred to IT 758 Compensation Program. This is done by executing the program:

Each eligible employee will now have a relevant IT 0758 record created.

 

Figure 10.21   IT 758 record for employee

An employee can have multiple compensation program records.

Once the ground rules are established we will move on to make sure that the other aspects of the plan have been properly setup.

We will now setup the micro eligibility or just eligibility of the plan. Feature CELGP setups up Eligibility grouping. The eligibility grouping is determined at runtime and is not stored in the system for each employee. For each employee in the US determined by the compensation area, based on the pay scale group, they are classified as EXEC, SALD, HRLY and OTHS.

 

Figure 10.22   Eligibility grouping

Each of the 4 groupings is set up with their unique eligibility requirements. They are setup using the eligibility variant.

Executives are setup with eligibility requirement that they should wait for 1 month before they become eligible for merit increase. They also should have fulfilled the performance requirement.

 

Figure 10.23   Merit increase eligibility for Executives

The Executive should have had a performance evaluation of 2 to 8 to be eligible as defined in the appraisal rule.

 

Figure 10.24   Performance rule for eligibility

For the salaried employees, the eligibility rule is that they have 3 months waiting period as compared to 1 month for the executives. This difference can be made when defining the eligibility for the salaried employees within the as same eligibility variant.

 

Figure 10.25   Eligibility for salaried employees

The hourly and others are not eligible for the merit increase. This is defined for each of them separately by flagging the ‘Not Eligible’ flag.

 

Figure 10.26   Eligibility for hourly employees

Note: Eligibility Override

It can also happen that some employees can be marked ineligible by the rules above but you want to mark them eligible e.g. an expatriate moving to a new host country or an hourly employee being made a salaried employee in the last month. Instead of making rule changes, Infotype 760 has been provided to handle exceptions. This has to be done at an employee level so that no other change is mandated in the configuration of the system. The override takes place directly at the plan level.

 

Figure 10.27   Eligibility Override

The eligibility rule based on the eligibility variant E-ME is assigned to the merit plan P-ME.

10.4   Setup the guidelines

The guidelines include many options. We will use the guideline matrix. The good part of this is that they can be changed in the production environment without the need for transports.

The guideline for the award is based on 2 aspects. One is how good the employee has done as determined by the appraisal rating they get and two is where their salary is on the salary band. If they are higher in the salary range, they would get lesser increase as compared to if they were on the lower side. This is done to keep the employees within the salary range for their current jobs. Their hard work might be rewarded with a better bonus or promotions.

 

Figure 10.28   Guideline setup

The guideline is set up to propose a percent increase using the default percentage column where the minimum and maximum percent allows for giving warning to the manager if they are going below or above the range. We will first setup the matrix segment.

 

Figure 10.29   Appraisal rating segment

The next is to setup the compa-ratio segments

 

Figure 10.30   Compa-ratio segment

Note: Values

The range is inclusive means that the minimum and maximum are included. If we were to say that ‘unsatisfactory’ is if you get any number from 0 to 3 and below average is from 3 to 6, the system would give an error saying that the dimension can’t overlap. The value of 3 could be considered as both ‘unsatisfactory’ or ‘below average’ since the ranges is considered inclusive. Hence it’s very important to define clearly distinct range with no overlap. Hence the ranges are defined as 0 – 2.999 and 3 – 5.999

Finally we will setup the matrix that considers the increase determined together. If the employee has an appraisal rating between 7 and 8.999 then their segment is ‘Above average’ and if their compa-ratio is between 1.201 to 3.000 then their segment is ‘Above Midpoint’, then the guideline percentage will be the at segment 4 and 3, i.e. 2.5%.

 

Figure 10.31   Guideline matrix for Merit Increase

Guideline setup is the last step. A guideline is the combination of guideline variant and guideline grouping for a particular compensation area.

 

Figure 10.32   Guideline defined

For the same plan, the guidelines can be different for the executives and salaried employees. In our case, we have different proration rules that go along with them, the executive amounts will be rounded up the nearest 1000 and that of the salaried employees will be rounded up the nearest 100.

The Figure 1.33 shows the guideline for the Executives.

 

Figure 10.33   Guideline for executives

The Figure 10.34 shows the guidelines for the salaried employees.

 

Figure 10.34   Guideline for salaried employees.

The proration for executives is configured to round up the amounts to the nearest $1000. The proration will be based on the months hence if the employee has one guideline for 3 months and 16 days, it will be considered 4 months.

 

Figure 10.35   Proration definition

For bonus plan, we will define a bonus based on their performance only. Hence the guideline will have only one dimension in the guideline matrix.

 

Figure 10.36   Bonus guideline matrix for Executives

The Figure 10.37 shows the bonus guideline.

 

Figure 10.37   Bonus guidelines

The executive bonus guideline with the proration rule is seen in Figure 10.38.

 

Figure 10.38   Bonus guideline for executives

10.5   Setup the award for Basic Pay (IT 0008) and Bonus (IT 0015)

We will setup the plans first so that we can start the award process. The merit plan is setup as shown in Figure 10.39.

 

Figure 10.39   Merit plan setup

The bonus plan is setup as shown in Figure 10.40

 

Figure 10.40   Bonus plan setup

The payroll data is set up with the calculation based as the annual salary. There is no need to define the compensation component since the system will use the one that is already in the infotype 0008.

 

Figure 10.41   Merit plan calculation base and compensation component

The payroll data is set up with the calculation based on annual salary. It is required to specify the compensation component since there are multiple values that can be assigned.

 

Figure 10.42   Bonus plan calculation base and compensation component

Now let’s see how the award process works. The manager can view their own org structure.

Who is the manager?

The employee’s manager could have changed over the period of the plan. The manager, who is displayed as the manager of the employee, is the one who is the manager of the employee on the last day of the plan.

There are different reasons why employees show up as ineligible. Some are due to the eligibility grouping; some are due to eligibility rule and some due to eligibility override.

The budget refers the 2 budgets that will get impacted. They are referred to by numbers 01 and 02.

 

Figure 10.43   My MSS view

The manager can see all the of his/ her subordinates.

 

Figure 10.44   Planning

You will see 2 tabs per our Annual review process. One is Merit and other one is Bonus plan. The eligible employees have their amount fields open for entry. The rest is ineligible for some reason. The budget is also displayed on the top. Once we start the allocation it will cut.

 

Figure 10.45  Apply Guidelines

We can apply guidelines by first selecting the employee population and then clicking the ‘Apply Guidelines’. We can also override any of those values as show in Figure 10.46. The numbers will not be updated till you hit enter. The effective date can also be changed if needed. The manager can also add notes for each employee.

 

Figure 10.46   Override the guidelines

Any time the budget is exceeded; there is a warning message by default. It can be configured to be information or error message. The Figure 10.47 shows the warning message when the bonus plan has exceeded the budget.

 

Figure 10.47   Bonus Plan

In Figure 10.48, the message starting with a yellow triangle is a warning message and the message starting with red hexagon is an error messaged.

 

Figure 10.48   Error and Warning messages

The message can be configured as error or warning as shown in Figure 10.49

 

Figure 10.49   Changing the message type

Those awards will be submitted for approvals that don’t have any errors related to them. In Figure 10.50, the Merit plan award is not submitted because there is an error. The bonus plan award is submitted since there were no errors on it.

 

Figure 10.50   Submitting the plan

The approver of the compensation accesses the relevant employee together through the team viewer or can search for a particular employee as in Figure 10.51.

 

Figure 10.51   Search for an employee if it doesn’t show up in your team viewer

The approver would be able to see all the related information about the compensation award. They can approve or reject the request. The approver can navigate to previous step, approve all or reject all.

 

Figure 10.52   Approval Screen

Once you click the ‘Review’ button on Figure 10.52, it will change the status of the record to Approved. To reiterate, if you go to the R/3 system at this time, the infotype 0759 will show ‘Approved’ status.

 

Figure 10.53   Review and approve

The approved status still doesn’t mean the employee is going to get paid.

The employee’s infotype 0759 will show the compensation plans in their statuses.

 

Figure 10.54   Employee’s Compensation process infotype

The employee’s approved annual bonus is on infotype 759.

 

Figure 10.55   Annual bonus plan- infotype 0759 details

The annual merit increase that the employee has ‘in planned’ status is available in infotype 759.

 

Figure 10.56   Annual Merit Review- infotype  0759 Details

Compensation specialist can execute transaction for a group of people or for a specific person.

 

Figure 10.57   Process to activate the award

It will not allow you to change the status on the infotype 0759 to Active.

 

Figure 10.58   Change to Active not allowed on infotype 0759

Now let’s come back to approving the merit increase plan. The approver receives the merit increase plan to review. When it’s submitted, you will find that the previously activated record also appears. Basically all the plans with that review will come irrespective of their status. The merit plan award is submitted to the approver.

 

Figure 10.59   Submitting merit changes

The approver follows the same process as the one done for bonus plan award approval. The approver can also give comments. The status is “submitted” when the approver is deciding.

 

Figure 10.60   Approving merit increase

Once the approver decides to approve the award, the preview screen will be like Figure 10.61.

 

Figure 10.61   Approving merit changes

Once the approver clicks ‘Send’ does the status changes to ‘Approved’ as seen in Figure 10.62. Also note that on the top that you have reached the fourth and the last step “Completed”.

 

Figure 10.62   Final merit changes

The basic pay infotype at this stage will be as shown in Figure 10.63.

 

Figure 10.63   Before receiving the merit  award

When the compensation specialist activates this award, the basic pay will change to the new salary as shown in Figure 10.64

 

Figure 10.64   Updated Basic Pay

This completes the annual review cycle for merit increase and bonus. Each company will have other requirements that need to be worked into this solution. We will continue to explore more options in later chapters. But this process forms the core that needs to be built upon.

10.6   Enhancement to update Actions (IT 0000)

Many times there is a requirement to update the IT 0000 along with the awarding process. My companies like to have the annual review changes to be recorded in action infotype 0000. This can be accomplished by enhancing the BAdI. For other changes we can continue to follow the standard activation routine.

 

Figure 10.65   Changing the activation routine

10.7   Summary

We have covered all the aspects of the creating a budget, planning the award, submitting the award, approving the award and activating the award. Each of them can be made to align with the requirements that very specific to the company’s compensation plans and policies. There is one area that we have to customize and that is the workflow process related the approver. This process is very specific to each company and needs to be customized accordingly. The SAP note highlight some approaches.

9- The Compensation Infotypes

All the things that make up ECM on the SAP R/3

In this chapter, we will cover all the infotype and objects that are relevant to ECM. This will give us an understanding of what are the elements to look for in case of troubleshooting or just learning how the system works.

There are many compensation infotypes. It is important to remember that they are new and don’t use any of the old compensation infotypes. The ECM infotypes are:

The employee infotypes specific to ECM are:

Employee Infotype Description
0758 Compensation Program
0759 Compensation Process
0760 Compensation Eligibility Override
0761 LTI Granting
0762 LTI Exercising
0763 LTI Participant Data

The object types for budgeting are:

Object types Description
BU Budget units
O Organizational units

The relationships for budgeting are:

Relationships Description
A300 O is financed by BU
B300 BU Finances O
A003 BU belongs to BU
B003  

The transactions for ECM are:

Transaction Description
Budget  
PECM_START_BDG_BSP Start budget administration
PECM_GENERATE_BUDGET Generate budget from organizational hierarchy
PECM_INIT_BUDGET Upload budget values from Personnel cost planning
PECM_DISPLAY_BUDGETS Display budget
PECM_CHK_BUDGET Check and release budget
PECM_CONV_BDG_STKUN Convert budget stock unit
Compensation Administration  
PECM_CHANGE_STATUS Change compensation process status
PECM_CREATE_COMP_PRO Create compensation process records
PECM_UPD_0008_1005 Update basic pay from planned compensation
PECM_PRINT_CRS Print compensation review statement
PECM_CREATE_0758 Create compensation program records
Long Term Incentives  
PECM_EVALUATE_GRANT Evaluate LTI grants
PECM_PROCESS_EVENT Process event for LTI grants
PECM_CONV_LTI_STKUN Convert LTI grant stock unit
PECM_PARTICIP_IDOC Export LTI participant data
PECM_GRANT_IDOC Export LTI grant data
PECM_EXERCISE_IDOC Import LTI exercising data
Job pricing  
PECM_START_JPR_BSP Start job pricing
PECM_QUERY_SURVEY Extract data for survey participation

We will start reviewing them in details in later sections.

9.1      Infotypes

9.1.1       Infotype 0758- Compensation Program

Infotype 0758- Compensation program is a required infotype for any employee to be a part of the compensation process. If this infotype is not present then the employee are excluded from any compensation plans.

 

Figure 9.1   Compensation program

The infotype has a validity period. It has the compensation area, first program grouping and second program grouping.

An employee can have more than one compensation program infotype. This can make them eligible for multiple compensation programs.

This concept is similar to how SAP Benefits is set up. This is new in ECM and is not a part of the old compensation management.

The compensation specialist will run the transaction PECM_CREATE_0758 when it’s time to start the compensation cycle. This program will create the primary compensation program record only. If there are other compensation programs that the employee is eligible for, then they would need to be created manually.

 

Figure 9.2   Creating compensation program records

9.1.2       Infotype 0759- Compensation Process

This is a very important infotype. This infotype is created when either the manager saves the record when they select the eligible employees or the compensation specialist runs a report that creates the records en masse.

This record doesn’t show the validity period but has the effective date, it also has the status that starts with planned and is Active at the last stage. It also has the salary adjustment or bonus amounts.

 

Figure 9.3   Compensation process(Monetary awards)

For non-monetary awards like the LTI, the same infotype captures the number and the unit.

 

Figure 9.4   Compensation process infotype (Non-monetary awards)

The compensation process record can be created by the manager via the MSS for every employee. It can also be created in advance by the compensation specialists. They can also apply the guidelines so that the manager doesn’t have to do that step too. The manager just needs to make some discretionary adjustments to what has been proposed. The compensaiton specialist executes the transaction PECM_CREATE_COMP_PRO for the relevant population and relevant compensation plan.

 

Figure 9.5   Mass creation of compensation process records

There is an option to ‘Bring salary to minimum’. This might be useful in case there might be people who might to in a higher pay level but their salary is lesser than the minimum. To fix this inconsistency, selecting this option will at least get the employee’s salary within the range.

9.1.3       Infotype 0760- Compensation Eligibility Override

The eligibility configuration takes care of most of scenarios but then there are exceptions. The exception can be when an employee transfers from another organization and has been promised that they would be in that plan. There can be instances where there is a M&A and there is a need to provide some overrides rather than change the configuration for the first year. There needs to be a close monitoring of every overrides since overrides are always something that the auditors would like more information on and the due diligence done before the override was created.

The screen Figure 9.6 shows the validity period of the infotype, the compensation area and plan for which the override has been made for and whether the override is to make someone eligible or to make someone ineligible. If the eligible date is left blank, then the employee is eligible for the entire validity period of the infotype.

 

Figure 9.6   Compensation eligibility override

This infotype will be used by the compensation specialists and the manager doesn’t need to have access to it.

9.1.4       Infotype 0761- LTI Granting

In case of the monetary awards, when the award is activated, it creates either a record in IT 0008 or IT 0015 or IT 0267. But in case of LTI or non-monetary award that is not the case. The corresponding infotype that is created when the award is activated is infotype 0761 LTI Granting. The end date of the validity period defines the expiration date of the LTI award. The screen Figure 9.7 shows all the information that will be captured when the LTI award is activated. If there is any need to override the configured exercise price, vesting rule or exercise window rule, then it can be done manually on this infotype.

 

Figure 9.7   LTI Grant

9.1.5       Infotype 0762- LTI Exercising

This infotype can be maintained either manually or via an interface from the broker. The tax calculation function is available for US andGermanyonly.

 

Figure 9.8   LTI exercising data

The LTI functionality is more robust than the previous versions and continuously being improved.

9.1.6       Infotype 0763- LTI Participant Data

This infotype stores the participant data. It is sent to the brokers too to let them know if that employee is an insider, director and if the employee has a substantial percentage of ownership. This information is needed for statutory reporting reasons in theUS.

 

Figure 9.9   LTI Participant data

9.2      Objects & Relationships

The Budget structure unit (BU) is specific to ECM. The standard infotypes like 1000 Object and 1001 Relationship are used along with infotypes 1500 BS element management and 1520 Original budget. Both this infotypes can’t be managed using the R/3 transactions and are for display. They have to be managed by budget transactions.

Each budget unit has another infotype 1500 that stores more information in the background as shown in the screen Figure 9.10

 

Figure 9.10   Budget structure details- Infotype 1500

Though it’s not directly used, the infotype 1520 is also created.

 

Figure 9.11   Infotype 1520- Original budget information

The budget relationship is really the only relationship that used within ECM.  The first relationship A/B003 helps in creating the budget structure hierarchy.

 

Figure 9.12   Budget structure hierarchy

The other relationship is between the budget units and organizational units. The budget unit finances the organizational unit for the amount or numbers. The financed numbers are store on the additional data pad.

 

Figure 9.13   Financing infotype

 

Figure 9.14   Additional infotype is stored for each relationship

9.3      Transactions

9.3.1       PECM_UPD_0008_1005- Update basic pay from planned compensation

The planned compensation holds the salary structure. When you execute the transaction PECM_UPD_0008_1005 for the given population, it will change the pay structure component of pay grade area, pay grade type, pay grade and pay grade level. It will NOT change the salary. This can happen after a job or a position has been re-evaluated and requires the grading to be changed. If the pay has to be changed, then pay change actions as defined in the system need to be executed as a subsequent task.

 

Figure 9.15   Basic Pay to Planned compensation

9.3.2       PECM_GENERATE_BUDGET- Create budget using the program

This transaction helps in creating the budget similar to the way it can be done by using the Portal. You can specify the budget type, budget period, organizational hierarchy and levels. In case of LTI, you can specify the stock units.

 

Figure 9.16   Generate budget

9.3.3       PECM_INIT_BUDGET- Upload Budget amounts using PCP

If you have also implemented Personnel cost planning module, then you can provide the budget values based on the scenario you have created in PCP.

 

Figure 9.17   Upload budget amounts using PCP

9.3.4       PECM_CHK_BUDGET – Check and release budget

You can check and release the budget if the structure and amounts look correct. You can always run it in the test mode first before releasing it. If you have release the budget but not yet used it, then there is also a chance to reset it to planning and make changes. Once it’s released and there are awards that have made against that budget, it is not really possible to reset it or make any changes.

 

Figure 9.18   Check and Release budget

9.3.5       PECM_CONV_BDG_STKUN- Convert LTI grant stock unit

There might be a scenario where you have awarded stocks to your employees. Before they are exercised, the company announces a split. This split would also mean that the budget should be adjusted for the split and going forward new stock units should be awarded. This can be done using this transaction.

 

Figure 9.19   Convert budget stock units

9.3.6       PECM_CHANGE_STATUS- Change compensation process status

This transaction is very useful when compensation specialist wants to change the status of infotype 0759. Normally the manager is expected to do this on an individual basis. But if the manager is not available for any reason, the compensation specialist can use this transaction and move it to the next status. It might also be that at a key date, if there are no rejects then all the submitted awards are approved en masse.

There is one status change that has to happen using this and that is changing the status from Approved to Active. This is the most significant change since it finally creates records that impact the payroll and employee recieving the award.

 

Figure 9.20   Compensation process status change

9.3.7       PECM_PROCESS_EVENT- Process Events for LTI plan grants

The manager can handle the LTI grants for the compensation related processes. But there are other events that can impact the LTI grants. There are instances where the grants have to be cancelled or vesting rules have to be overridden, etc… The compensation specialist needs access to this transaction so that they can make a mass change or a change on an individual.

 

Figure 9.21   LTI grants

9.3.8       PECM_CONV_LTI_STKUN- Convert infotype 0761 after stock split

The employee might have already been awarded the stock. Then the stock split is announced. This means that employee’s award in terms of number of units and type of units can change. This change will be affected by using the transaction for the relevant LTI plan.

 

Figure 9.22   Convert infotype 761 after stock split

9.3.9       PECM_PARTICIP_IDOC- Export LTI participant data

LTI process will include brokers who can actually sell the awards. The brokers would need the participant data. You would need to give the receivers information, the LTI plans and employee population that needs to be sent.

 

Figure 9.23   Export LTI data

9.3.10     PECM_GRANT_IDOC- Export LTI grant data

Once broker establishes the employee population, the employee’s grant data is sent across. This will make sure that the broker has all the required grant information. This will also allow the employee to exercise their awards.

 

Figure 9.24   Export LTI grant data

9.3.11     PECM_EXERCISE_IDOC- Import LTI exercise data

The broker sends an inbound feed to ECM with the details related to the awards the employee has exercised. Company needs it for tax purposes. This information will update the infotype 0762 where all the exercising data is stored.

 

Figure 9.25   Import LTI exercise data

9.3.12     PECM_QUERY_SURVEY- Salary survey participation

Companies take part in survey and need to give data to the provider. This can become a very easy task if job pricing maps the jobs too.  It’s just a matter of running this report and providing the output file to the vendor.

 

Figure 9.26   Send salary survey particiaption report

9.4      Summary

This chapter provides a quick reference to all the different objects in R/3 including the ECM infotypes, objects, relationships, transactions etc… We have covered the R/3 transactions related to budgeting, compensation administration and job pricing. We have also reviewed all the important infotypes  related to portal transactions.

8- Awarding Employees

Awarding the employees for their hard work and efforts is very important.

The objective of this chapter to cover the process of awarding employees eligible for compensation plans. We will explore the 2 ways of awarding. We will introduce Manager Self-service for the first time. We will also see how the compensation specialist can affect that change. We will take the happy path and explain the entire configuration. Then in subsequent chapters pick up as many exceptions as possible.

The whole purpose of compensation planning is to award the employees for their contributions. Each company has different approach to this. Some companies are more decentralized and allow managers that lower levels to make decisions on the awards, the other are more centralized and the decision making takes place at a higher level in the organization. In some companies, the lower level manager does initiate the award but then it has to go through hoops of approval. Most of these processes are supported by the system with some limitation. The limitations come from the fact that it is very difficult to create a system where processes are not standardized. For example, if Sales wants are much decentralized system and IT wants a very centralized system, it will become difficult to build one consistent system efficiently and maintain it efficiently.

During the awarding process, all the items come together. We will see the budgeting information, we will see eligible and ineligible employees, we will see where the guidelines are applied. We will also see how the compensation plan, compensation review and compensation review items play into the mix.

8.1 Manager Approval Process

The portal provides a great front-end for the manager to process awards to the employees. The manager will need to login to the Manager Self-service.

Figure 8.1 Manager Self-Service starts

There are many things that a manager can do with MSS. We will navigate to the compensation management section. Manager Self-service • Planning • Compensation Planning

Figure 8.2 Navigate to Compensation Planning

Clicking Compensation Planning launches the page Figure 8.3. You will now see the Compensation Reviews that we have configured. We have chosen the ‘Annual Review’ below. After selecting the process, we select the employees based on the organizational unit they belong to. We then move to on to Plan mode.

Figure 8.3 Select the employees for award process

Before we move out of the screen, let’s review the screen in a little more detail.

It lays out the steps at the top of the screen. In our case, there are 4 steps:

  • Select- Select the employees to be reviewed
  • Plan- Plan their award
  • Review and Send- Review and send the award proposal to the one up manager
  • Completed- See the overview and changed status.

It’s important to select from the list of Compensation Review, which review we want to do. In our case, it’s Annual Review. After that you need to select the employees and click Plan, the page Figure 8.4 comes up.

The compenation review items are represented by the tabs. Each compensation review item will show the eligible and ineligible employees along with the relevant budget information.

Typically, an employee is reviewed for merit plan and bonus plan. If the employee is on a higher side of their pay range, then there might be an option to provide a lump sum merit bonus to avoid them from crossing over the pay range. Also if the organization feels that there needs to be equity adjustment that has to be made any male/ female pay alignment or other kinds of adjustment then an equity adjustment can be given separately. These different adjustments are helpful since it helps in reviewing each categories different and managing them appropriately.

Figure 8.4 Annual Review with multiple plans

The executives are sometimes awarded with Long-term incentive plans or stock options. This award can be included in the Annual review cycle. If an employee under a manager is eligible, the manager can award the employee.

Figure 8.5 Annual Review with Stock Options Plan

Before we move on, let’s see what else is on the screen.

You would continue to see the steps to complete on the top. The ‘Show Statistics’ and ‘Show Additional Information’ provide information to the manager to help them make their decision. The manager can see the budget information on the screen itself. The can also click on the employee or position to see extended information on them.

All the compensation review items that we saw in the previous screen Figure 8.5 have been configured using the path in the screen below Figure 8.6.

Figure 8.6 IMG path for adding review items

Each of the compensation review items are maintained here so that they can be reviewed when the manager is in the MSS.

Figure 8.7 Adding a compensation plan to the compensation review as a compensation review item

8.1.1 Configuration of the Portal Screens:

The employees seen in the team viewer are not directly controlled by configuration for ECM but are driven more so from the portal configuration.

What you see in the team viewer is controlled by the configuration in the Object and Data provider section of the IMG.

Figure 8.8 Object and Data Provider

Changing the column headings for the Portal

We will see how we can change the column name. We can change the default column name from Employee to Employee name’ by following the configuration path below and changing it on the screen Figure 8.9

IMG • Integration with other mySAP components • Business Packages/ Functional Packages • Manager Self-Service (mySAP ERP) • Object and Data Provider • Data Provider • Define Columns

Figure 8.9 Changing the column names on the Portal

Changing the employee population displayed

Under each compensation review items, the standard SAP configuration will show all eligible as well as ineligible employees who are the subordinates of the manager. Currently it will show all the employees with a column that shows whether they are eligible or not.

Figure 8.10 All employees displayed

If you want to see only the eligible employees, please refer to SAP note 919298 for detailed steps.

8.2 Employee Record Update

When the manager saves an employees award, it creates the infotype 0759 in the R/3 system.

Figure 8.11 Compensation Process Infotype 0759

The awards normally follow an approval process. ECM doesn’t provide any standard workflow to handle approvals hence any workflow requirements has to be done as a custom development. The different status are Planned, Submitted, Approved, Rejected, Active. When the record is being created for the first time and has not yet been saved, the portal will show the status as New. Once it’s saved, the status will become Planned. Then it gets submitted to the manager’s manager, the status is Submitted. Depending on decision, the record will either be Rejected or Approved. Till this point, everything is happening within ECM. All the approved records need to be paid and this is when the last step happens. It can’t be done by the managers but it needs to be done by the compensation specialist. They ensure that at the right time, the status is moved from approved to active.

Figure 8.12 Activating the award

Once the compensation specialist runs the process in test mode, they can check if there were any errors or issues. If the result is as you expect, then remove the test run flag and let the program make updates to the right infotypes viz Basic Pay, additional payments, off-cycle payments or any other infotype as per the activation BAdI.

The selection criteria are very flexible. It also allows for the employee selection based on an Org structure. The compensation specialist can make any change to the status of the award using this program. It is important to review the importantOSSnotes.

8.3 Technical Points

The configuration of different plan attributes is a critical part.

Figure 8.13 Configuration of plan attributes

Based on the compensation area, the compensation plans are available for maintenance. Each plan is displayed with its start date and end dates.

Figure 8.14 Different Plans

We select the plan we want to maintain. The core attributes are eligibility of the plan, guidelines associated with plan and rounding rules for the plan. Also the plan can have different attributes in different time period. This scenario can happen when there is a change in company policy for th plan.

Figure 8.15 Setting up the compensation plan attributes

Payroll integration is very important. We can select the plan we want to maintain in the similar steps for configuring the payroll data.

Figure 8.16 Plan selection for payroll configuration

We also need to define the wage type that needs to be updated on employee’s IT 0008, 0015 or 0267 when the compensation award is activated. This is defined here and one wage type can be captured. If more wage types need to be captured, then custom solution needs to be used.

It is also required to provide the calculation base for calculating the increases.

If a particular reason is associated with compensation that needs to be captured for the off-cycle payments, it needs to be provided here.

Figure 8.17 Setting up payroll attributes and off cycle reason if necessary

If the calculation base is not based on standard annual salary calcuations, ECM provides the BAdI HRECM00_CALCBASE to design the custom program.

Figure 8.18 Business add-in for calculation base

There also other BAdI that are available to provide flexibility but it comes at a cost of creating your own code and testing it out. ECM has been cognizant of the fact that your might want to use the standard feature most of the time and only use custom code for exception. Though once the BAdI has been activated, it will always be executed, ECM provides the routine from within the BAdI to call standard feature.

Figure 8.19 Other setting to assist in checking consistency before making the award

Implement this Business Add-In to define additional customer-specific consistency checks. Whenever the manager performs an action in the Manager Self-Service Compensation Scenario, consistency checks are performed on the changed or selected data. The standard routine already inlcudes several checks, for example guideline and budget checks, before you can save the data.

This Business Add-In consists of the method described below, to which you can add customer-specific checks. These checks can be used to reject data records and generate error messages. To allow checks involving more than one person or plan, the method is not called for each record separately, but only once per dialog step receiving the complete set of records in internal tables.

For Example: You want to ensure that the effective date for a particular compensation plan is within the months in which the employee’s anniversary falls. If the manager enters a date outside this period, the system should generate an error message.

Figure 8.20 Business add-in for check consistency of data

Implement this Business Add-In to change the activation process and determine the new records of secondary infotypes. It consists of the methods described below.

ACTIVATE_PROCESS: During the activation process, the system does not only change the status of the infotype Compensation Process (0759) record in the standard coding, but also creates or updates a record of a secondary infotype. Depending on the plan category, this can be either infotype 0008, 0015, 0267 or 0761. This method enables you to replace the update or creation of the secondary infotype during the activation, for example by an update of a customer-specific infotype. The other part of the activation, that is, the modification of the status of the 0759 record to Active, remains unchanged.

For Example: You want to process compensation plans that on activation should not update any of the standard secondary infotypes but a customer-specific infotype. In this case, you must implement method ACTIVATE_PROCESS.

You want to apply a rounding rule on updating infotype 0008 records when a salary adjustment is activated. In this case, you must implement both methods ACTIVATE_PROCESS and CALC_SAL_ADJUSTMENT.

Figure 8.21 Business add-in to make changes to infotypes updated with activation of the awards

Implement this Business Add-In to make changes concerning the evaluation of an employee’s base salary and salary-related quantities.

For Example: The employee’s salary should be evaluated based on the data stored on a customer-specific infotype.

The compa-ratio or percent-in-range should be calculated using reference or minimum, maximum salary values stored in a customer-specific table.

Figure 8.22 Business add-in with evaluation of employee’s base salary and salary related quantities

When a manager is awarding an employee using the standard MSS transaction, it is important to test it thoroughly before releasing it. The following kinds of errors are easy to fix.

Figure 8.23 Missing eligibility configuration

The table series beginning with T71 is used for ECM. These tables are populated using by configuration but the errors refer to a table. You might need to use transaction SE16 to see the content of the table and decipher which configuration needs to be fixed.

There are multiple SAP notes that are very useful and should be reviewed and its impact well-understood to design a good system.

8.4 Summary

In this chapter, we have covered the different configuration relate to compensation plan configuration. The MSS has been introduced for the first time with some of the navigation aspects. We also reviewed how the R/3 configuration plays out on the Portal for compensation review, compensation review items, budget, eligibility and guidelines.

15- Appendix

Important information you might need.

The objective of this chapter is provide theOSSnotes that are very important along with the entries for important resource websites. Introduce BPX community.

15.1   Important ECM SAP Notes

The following are some of the important ECM SAP notes.

SAP Note # SAP Note description
1121960 Extension of help text for Anytime Review flag
1164142 Extend package interface PAOC_ECM_ADM_BL
919298 Compensation Planning ECM displays ineligible employees
886465 Survey Data upload does not store the 60th percentile
878336 ECM Function modules: parameter to ease BAdI implementations
879720 FAQ Enterprise Compensation Management
921064 Runtime error when removing job match
891774 Runtime error in IMG step Define Guideline Matrices
605114 Authority check for Compensation approval process
1141686 Incorrect data is displayed in the TCS

15.2   List of Infotypes

Infotype number Infotype name
0758 Compensation Programs
0759 Compensation Process
0760 Compensation eligibility override
0761 LTI granting
0762 LTI exercising
0763 LTI Participant data
   
1001 A/B300- Financing of org units
1001 A/B003- Belongs to (Budget unit to budget unit structure)
1500 Budget structure element management

List of Objects

Object type Object Description
BU Budget Unit
   

List of tables

List of tables Table description
T71JPR*  

15.3   Transaction codes

Transaction code Transaction name
PECM_START_BDG_BSP Start Budget Administration
PECM_GENERATE_BUDGET Generate budget from organizational hierarchy
PECM_INIT_BUDGET Upload budget values from personnel cost planning
PECM_DISPLAY_BUDGETS Display budgets
PECM_CHK_BUDGET Check and release budget
PECM_CONV_BDG_STKUN Convert budget stock unit
   
PECM_CHANGE_STATUS Change compensation process status
PECM_CREATE_COMP_PRO Create compensation process records
PECM_UPD_0008_1005 Update basic pay from planned compensation
PECM_PRINT_CRS Print compensation review statement
PECM_CREATE_0758 Create compensation program records
   
PECM_EVALUATE_GRANT Evaluate LTI grant
PECM_PROCESS_EVENT Process event for LTI grants
PECM_CONV_LTI_STKUN Convert LTI grant stock unit
PECM_PARTICIP_IDOC Export LTI participant data
PECM_GRANT_IDOC Export LTI grant data
PECM_EXERCISE_IDOC Import LTI exercising data
   
PECM_START_JPR_BSP Start job pricing
PECM_QUERY_SURVEY Extract data for survey participation

15.4   List of BAdI

BAdI Name BAdI Description
HRECM00_ACTIVATION Replace activation procedure or new infotype determination
HRECM00_BDG0001 EC budgeting
HRECM00_CACLBASE Replace determination of calculation base salary
HRECM00_CARGP Replace evaluation of compensation area
HRECM00_CP1GP Replace evaluation of first compensation program grouping
HRECM00_CP2GP Replace evaluation of second compensation program grouping
HRECM00_EFFDATE Replace increase or award effective date
HRECM00_ELIGIBILITY Replace or extend eligibility check
HRECM00_ELIGP Replace evaluation of eligibility group
HRECM00_GDEGP Replace evaluation of guideline grouping
HRECM00_GUIDELINE Replace or extend guideline evaluation
HRECM00_MATRIX_SEGM Define axis for matrix guideline
HRECM00_SALARY Replace evaluation of salary and salary related quantities

7- Guidelines Setup

Guidelines help in achieving fair distribution of available resources, providing managers with boundary conditions and ensuring that the whole organization is in alignment

In this chapter we will understand what are guidelines, how are they setup, how they can help in controlling the budget. ECM provides a very robust framework to setup guidelines and manage them on an on-going basis.

 Like all the different components in ECM, Guidelines are independently setup and subsequently assigned wherever required. They are setup irrespective of eligibility setup, compensation program setup etc… The same guideline can be used by multiple plans. It’s normally a good practice to align the guidelines to eligibility and compensation plans. This will allow us to keep all of them in sync if something where to change for a plan.

SAP has been very diligent to make things as aligned as possible. If you review the guidelines configuration, it is very similar to eligibility configuration.

Guidelines are optional. If you don’t want a compensation plan to have guidelines, then it’s not necessary to design and define them at all.

 

Figure 7.1   Compare Eligibility configuration with Guidelines configuration

There are different logical pieces of building a guideline.

  1. Grouping employees
  2. Defining guideline
  3. Special setup- Proration
  4. Defining Guideline Variants

The configuration of the above pieces doesn’t necessarily happen in the same order.

7.1      Defining guideline groupings

Guideline grouping is a way of grouping different employees together that may have same award guidelines e.g. all executives bonus should have similar bonus guidelines, all salaried employees should have similar bonus guidelines…

  Hourly Salaried Executives Others
Annual Merit Guideline   Yes Yes  
Annual Bonus Guideline   Yes Yes  
Annual Stock Guideline     Yes  
Above & Beyond Guideline Yes Yes   Yes

It is always a good idea to keep the eligibility and guideline grouping similar even if it mean repeating configuration or creating some redundant groups in either one of them. This will be helpful in the long run when you will need to create more plans, modify plans, troubleshoot issues etc.

Do we need different groupings even if the guidelines are same?

If the annual merit guidelines for Executives are the same as Salaried, we could have one grouping. But it is a good practice to keep them separate and provide the same guideline to each one. This will help in managing the plans effectively. When there is a change for executive and salaried employee guidelines, it is not required to maintain the features again and have to transport it then.

There are 2 methods to manage guideline groupings

  1. Standard requirements via Feature CGDGP
  2. Custom requirement via BAdI HRECM00_GPEGP

Guideline Grouping —> Feature CGDGP OR BAdI HRECM00_GDEGP

7.1.1       Feature CGDGP

The following steps describe the creation of the Feature CELGP.

Step 1. Create the name for the Guideline Grouping. Please note that each Guideline Grouping is unique to each Compensation Area.

 

Figure 7.2   Naming the Guideline Groupings

Step 2. Eligibility Groupings are assigned to specific employee groups/ subgroups using the Feature CGDGP

 

Figure 7.3   Feature CGDGP assignments

 

Figure 7.4   Process Feature CGDGP decision parameters

This is a very versatile feature that would be required for global compensation planning. This decision tree contains compensation areas, First compensation program grouping, second compensation program grouping, pay structure, job, enterprise and personnel structure. This will assist in creating employee groupings in their smallest details to effectively manage eligibility for programs.

Versatile Feature CGDGP

The Feature CGDGP is very versatile. It has numerous parameters to create a very flexible and exhaustive Eligibility grouping assignments. Our example uses Employee Groups and Subgroups. It can also use the Organizational structure or other elements in the feature:

 

Figure 7.5   Feature CGDGP using Pay Scales.

7.1.2       BAdI HRECM00_GDEGP

The Business Add-in HRECM00_GDEGP can be used instead of the Feature CGDGP where the feature is not sufficient to provide the required Guideline Groupings. The BAdI will help in defining unique population of ‘Expatriates’ and their guidelines being different from other employees with the same group. The way the BAdI is implemented, it can still allow you to use the feature for everything else and the additional code can be written for exceptional cases.  

 

Figure 7.6   Business Add-in for Guideline Groupings

There can be multiple implementations for the BAdI but the one that matters is the one that has been activated.

7.2      Defining Guidelines

There are multiple options to provide guidelines to the manager on how to distribute their awards. These guidelines are setup by the compensation/ HR departments to ensure that manager’s discretion to award is bound by certain constraints that an organization faces.

Guidelines can be:

  1. Fixed percentage ranges
  2. Fixed amount ranges
  3. Matrix ranges
  4. For stocks, fixed number ranges

The matrix ranges provides the most flexibility for the defining guidelines. It allows different parameters to do determination of guidelines. E.g. If an employee receives more than 5 point performance rating and has compa-ratio below 1 then the guideline is different then someone who received 8 points performance rating and has a compa-ratio that is higher than 1.

 

Figure 7.7   Configuration of the guideline

The Guideline matrix is separately defined since it provides many more parameters and is attached here once it’s been setup.

Proration rule is defined to help in prorating the guideline. If an employee has been with the company for 6 months then the guideline should be appropriately prorated to suggest 50% of the award in comparison to an employee who has been with the company for the full year. Proration also has many parameters and hence it’s configured separated and then attached here.

7.2.1       Defining Matrix guidelines

Matrix guideline is very important component since it allows the companies to manage the awards process and keeping unusual awards contained.

SAP delivers the following methods that can be used out of the box:

Method Description
AGE Age
APPR Appraisal
CRAT Compa-ratio
MBOA MBO appraisal
PIR Percent in Range
SERV Length of service

Though, method AGE might not be something that can be used inUSA, in other countries inAsiaandEurope, it is legitimate.

The methods are implemented using function modules. We can create new methods or copy the existing function modules and modify to create more methods.

 

Figure 7.8  Delivered Matrix methods

These methods are used to define the dimensions of the guideline matrix. If the guideline is

    Compa-Ratio
    Below or equal to 1 Above 1
Ratings 4-6

15% – 20%

10% -20%

7-8

20% – 25%

18% – 25%

Compa-ratio and ratings will form the dimension segments when building the Guideline Matrix.

7.2.2       Define dimension

The details of the dimensions can be added to ensure that we get the right level of clarity. With compa-ratio we don’t need to define anything further. With MBO, we need to clarify which appraisal element we are using. With Length of service we would like to clarify that we want the length of service in months (unit of measurement). The screen Figure 7.9 allows you to select the dimension that you would like to use. The list of dimensions will increase as you implement your own functions apart from the standard delivered ones. The dimension date shift can allow for more comparison. E.g. you could have one dimension that calculates the compa-ratio for the employee in the current period and another dimension that calculates the compa-ratio of the employee a year before. This can also be used for appraisals where if a person receives excellent ratings for 2 consecutive years might have a different guideline as compared to the one who receives excellent rating in one of the years. This kind of dimensions can be achieved by using the date shift parameter.

 

Figure 7.9   Defining the compa-ratio dimension

The method parameter in Figure 7.10 allows us to enter the appraisal element number.

 

Figure 7.10   Defining the Performance dimension

7.2.3       Defining Matrix Segment

Defining each matrix segment can be a lot of work. There is a lot of upfront work that needs to be done by compensation specialist to ensure that the segments are correctly defined to allow the guideline definition to the granularity required. Each dimension values have to be reviewed and segmented as shown in Figure 7.11. The compa-ratio is grouped GT01 if the compa-ratio is greater than 1. The compa-ratio is grouped LE01 if the compa-ratio is less than or equal to 1. It’s important to note that the ranges are inclusive. Hence we have the GT01 defined the minimum result as 1.001 and not as 1.000. The values can have up to 3 decimals.

 

Figure 7.11   Matrix Dimension Segment- Compa-ratio

There can be more elaborate segments like in case of performance ratings.

Segment Description Minimum result Maximum result
1 Unsatisfactory                     2.999
2 Below average 3.000 4.999
3 Satisfactory (Target) 5.000 6.999
4 Above average 7.000 8.999
5 Excellent 9.000 9.999

It is important to note that we could also use the satisfactory segment as the Target (or the default). We will review this later.

7.2.4       Defining the Matrix

Finally it’s time to define the matrix. For Annual bonus, we would like to have guidelines based on the compa-ratio and performance. A person who is already higher in the pay range and higher performance would be eligible for a higher bonus range since their merit increase could be capped.

We can have a maximum of 3 dimensions in the matrix. If you consider that each dimension has 5 segments, then the matrix will have a total of 125 defaults that need to be setup. If you include that you want to specify a range then the entry values will become 375. Hence it’s a balance between allow manager discretion and management control.

There are 3 default types, amount, percentage and number and each can have minimum, maximum and default. You can define whether you just want a default without a range or a combination of them. Depending on that you would be provided entry fields. You can only select amount or percentage or numbers.

 

Figure 7.12   Setting up the Matrix

If you select amount, you can also specify the Unit of Time, if you are referring to amount as yearly, monthly…

7.2.5       Setting Up the Matrix Values

This can be one of the most tedious tasks if there are a lot of values to be entered and if the matrix is big. It might have hundreds of values.

Note

This view (V_T71ADM23) is available for maintenance in the production environment. If there are change to the values in subsequent years, they don’t have to be transported but are to be changed in the production environment. Based on the current date, only the relevant values will be displayed. If you want to see all the values for different date ranges, the [Expand/ Collapse] button on the screen need to be used.

 

Figure 7.13   Completing the Matrix as per the business requirement

7.2.6       Defining Proration

The default value in the compensation guidelines can be automatically prorated using the SAP standard proration program. It has some limitations but is overall a good way to approach the complex topic of proration.

If the employee remains in the same plan but has a change in guidelines during the plan period, then the proration rule can make the necessary calculations automatically.

Scenario:

There is an employee whose compa-ratio was less than 1 during the first 165 days but during the plan period, the employee’s position changed making their compa-ratio greater than 1. The limitation is that the employee’s base salary will be calculated only once for the plan period and doesn’t get adjusted. 17.5% but then it becomes 15%

Calculated percentage

(165/365) * 17.5% + (200/365) * 15.00% = 16.13%

If we consider a salary of  $100,000, the prorated guideline default will be $16,130.

 

Figure 7.14   Proration Rule

7.2.7      Defining the guideline variant

The guideline variant is a combination of the guideline grouping, guideline and proration rules. The guideline variant is the end state of the guideline process. Only one Guideline variant can be assigned to one compensation plan.

7.3      Configuration Steps

7.3.1       Goto IMG

Personnel Management •EnterpriseCompensation Management • Compensation Administration • Guidelines

 

Figure 7.15   All the Guideline configuration

The guidelines have more configuration due to the definition requirement for the matrix and also the proration rules.

7.3.2       Create Guideline Variant

The guideline variant should be aligned to the compensation plans. It is a good idea to copy and create a new guideline variant for each plan even if the plans use the same guidelines functionally. This would avoid any guideline changes made to one plan inadvertently changes the guideline for another plan.

 

Figure 7.16   Compensation Guideline Variant

It’s important to note that guidelines are specific to compensation area. If you have created guidelines in other compensation area, you can’t copy them to a different compensation area but need to recreate them.

7.3.3       Create Guideline Groupings

The grouping can be similar to the eligibility grouping, there might get more specific. Some companies might want to have a little bit different guideline for Executives who have been with the company for more than 10 years and the ones who have just joined and the ones who are expatriates. Hence even though they were all eligible as ‘Executives’ they would still have different targets when it comes to guidelines.

 

Figure 7.17   Compensation Guideline Grouping

Within the same compensation area, we can only have one setup of guideline groupings. Hence it’s important to reiterate that a lot of consideration has to be given by the compensation specialist on all the different groups that will require different guidelines across all the plans associated with this compensation area.

7.3.4       Create the Feature CGDGP

The feature will define each of the guideline groupings. The enterprise structure, personnel structure, pay structure and organizational structure fields are available to define the feature.

 

Figure 7.18   Guideline Feature

These groupings are expected to be stable. Any change will necessitate quite a bit of analysis on the impacts to the existing plans using these groupings.

7.3.5       Define Guideline Proration Rule

This is a newer functionality in ECM and it was not a part of the old compensation management. The proration can be on a daily basis or monthly basis and the result thereof can be rounded as required. The proration applies to the guidelines (and not to the actual salaries).

If an employee has been in the plan for the whole year:

Jan to April- guideline default – 10%

May to Dec – guideline default- 15 %

Prorated guideline- (4 months with 10%) + (8 months with 15%) = 13.33%. If we use days instead of months, the calculation will be more specific. But sometime it’s preferred to use the months to avoid any dependency on the exact date of the transaction.

If the rounding type is set to round up, then the 13.33% will be rounded up to 14%

 

Figure 7.19   Proration Rule

7.3.6       Matrix Guideline

There are multiple configuration items for defining the matrix guidelines

Define methods for matrix dimensions and BAdI

There are standard SAP delivered methods that we can use. In case we want to define new dimensions to capture the business unit a person is working in, then we can define the method as Z001- Business Unit. The next step is to write that method in the BAdI. In the screen Error! Reference source not found., you would need to click create and start with the creation of the new method.

 

Figure 7.20   Creating custom method for getting the business unit of an employee

The custom method creation will need a good ABAP programmer. The BAdI builder screen Figure 7.21 gives a glimpse of the coding that is relevant to the programmer.

 

Figure 7.21   BAdI builder for creating new method for matrix dimension

Matrix dimensions

The matrix dimension specifies the return values along with any parameter that might be required. If we are using the method Length in Service, we will need this step to specify that we need the length of service return in years (rather than day or months). In other cases we will just specify the method without any other detail e.g. compa-ratio.

Matrix segments

The matrix segment creates segment of the dimension. The compa-ratio can have values from 0 to 2. We could divided it into 2 segments, one segment is greater than 1 and other segment that is less than or equal to one.

If we want to create different segment for the same method, we should create a different dimension using the same method and create new segments.

Define guideline matrix

The guideline matrix defines the dimensions that will be used for the guideline matrix. There can be a maximum of 3 dimensions. The guideline can be in amounts, percentages or numbers. You can select any one for the given matrix. Also you can select whether you plan to define the minimum, maximum and/or default.

Assign matrix values

The last step is to assign the values for each cell of the matrix. This will be used when the manager applies guidelines for the employee.

7.3.7       Define Compensation Guideline

Finally we define the guideline for a guideline variant for each of the guideline grouping.

 

Figure 7.22   Create compensation guideline

The guidelines have validity dates. Hence if there is a change in guideline, all that needs to be done is that new validity period needs to be selected and new guideline need to be configured.

In cases where we don’t want to define the guideline matrix, we can directly enter the amount, percentage or numbers when we create the guideline itself. All the people in the guideline grouping will get the same value.

 

Figure 7.23   Compensation Guideline for the Executives

If within the same guideline variant, we would like to give all the salaried employees a flat guideline of 10% default, then we don’t need to define the guideline matrix, but just provide the 10% in the guideline percentages.

 

Figure 7.24   Compensation guideline for the salaried employee

If there are still further requirements to create custom guidelines, then ECM provides a BAdI. Like all the other BAdI, you can define the custom logic for the guideline that can’t be defined using the standard settings, but use the standard guideline wherever possible. You need to set the  PROCESS_STANDARD = ‘X’ within the BAdI to use the standard routine.

 

Figure 7.25   More flexibility available using Business add-in

7.4      Summary

We have reviewed all the aspects of guidelines in detail here. We have seen how guideline variant, guideline groupings, guidelines, proration, guideline matrix work. We have also seen the different BAdI that are available and how they can call the standard configuration wherever needed. This will provide all the background that you would need to setup the guidelines.

6- Eligibility Design

From each according to his ability, to each according to his needs!- Karl Marx

 Defining and configuring eligibility is one of the core requirements of any compensation plan. If the eligibility is not defined, then everyone in that compensation area would be eligible. Though eligibility definition is optional, it is pretty much certain that you would need to define it. Actually it’s more helpful not to define eligibility for development and testing, than it’s in production environment. We have touched upon the macro eligibility with compensation programs. In this chapter we will focus more on micro eligibility. We will:

  • Explain the concepts of eligibility
  • Explore the different options available to define eligibility

In ECM, the key terms used in defining eligibility are eligibility variant, eligibility grouping and eligibility rule. The eligibility variant will be defined based on the combination of eligibility grouping and eligibility rule. We will discuss them in subsequent sections.

6.1      Defining Eligibility grouping

Compensation plan eligibility grouping is defined by the organizational attributes of an employee and answers the question: “Who is an eligible employee for which portion of the overall compensation plan?” For example, salaried employees might be eligible for annual bonus programs; executives might be eligible for stock option programs, and so on. These distinct compensation plan components result in different eligible populations, based on different employee types. This concept is illustrated in Figure 6.1   Who is Eligible for which Portions of the Compensation Plan?.

 

Figure 6.1   Who is Eligible for which Portions of the Compensation Plan?

Eligibility groupings can be created using the standard method feature CELPG or the custom method BAdI HRECM00_ELIGP.  Eligibility groupings are defined for each compensation area. These groupings should be carefully done and balanced. If there are too many, it will increase the maintenance, if there are too few, we might not be able to provide granularity for plan eligibility. We will describe each on of them in a little more details in the next section.

6.1.1       Using Feature CELGP

Before we create the feature, we need to setup the eligibility grouping that we plan to have.

  • Specify a short name and long description of the eligibility grouping, as shown in Figure 6.2   Naming Eligibility Groupings
 

Figure 6.2   Naming Eligibility Groupings

Once we have created the eligibility groupings, we need to find the way to define them. If our personnel structure (employee group and subgroup) matches this requirement, then we can use them to create the feature. As we plan to use the compensation area consistently, we can create the decision tree under the compensation area based on employee group and employee subgroup that groups the Executives, salaried and others.

 

Figure 6.3   Feature CELGP assignments

Note

Feature CELGP is very versatile. It has numerous parameters you can use to create flexible and exhaustive eligibility grouping assignments. Our example uses Employee Groups and Employee Subgroups, but you can also use pay structure or other elements, as shown in

 

Figure 6.4   Process Feature CELGP Decision Parameters

The decision parameters shown in Figure 6.4 provide flexibility that can be very useful for developing global compensation programs. It contains Compensation Area, First Compensation Program Grouping, Second Compensation Program Grouping, pay structure, Job, and enterprise and personnel structure. It will assist you to create employee groupings that are granular enough to effectively manage eligibility for programs in your organization.

If the eligibility grouping of Executive, Salaried, Hourly and others has defined by pay grade, we can create the feature CELGP based on the pay structure parameters.

 

Figure 6.5   Feature CELGP using Pay Scales

The objective of reviewing the different options here is to highlight the fact that since each implementation is different, ECM provides the functionality to align it to each SAP HR implementation and each company policies. Once it’s been defined, one has to be very cautious in changing them and study the change impact.

6.1.2       BAdi HRECM00_ELIGP

You can use BAdI HRECM00_ELIGP instead of Feature CELGP if it is not sufficient to provide the required eligibility groupings. Like most of the BAdI in ECM, you can call the standard feature from within the BAdI. This allows for handling the exception in the BAdI but the rest of the decision-making process can be setup using the feature.

The BAdI can be initialized as seen in Figure 6.6. It will need a good functional design along with an ABAP developer to deliver the requirements.

 

Figure 6.6   Business Add-In for Eligibility Groupings

We should now be able to setup the core eligibility framework. We should have all the eligibility groups in place to begin the actual definition of eligibility rules.

6.2      Defining Eligibility rules

Eligibility rules can be defined for every eligibility group. An eligibility variant groups eligibility rules for each group that need to be assigned to a specific compensation plan. E.g. for the annual bonus plan, an executive has 2 months waiting period and a salaried employee has a 6 months waiting period. To accomplish this, we would create on eligibility variant “Annual Bonus”. We would define the eligibility rule for eligibility grouping of Executive with 2 months waiting period. Within the same eligibility variant, we will define the eligibility rule for eligibility grouping of Salaried with 6 months waiting period. An eligibility variant for “Annual Bonus” will then be assigned to the compensation plan “Annual Bonus Plan” to be effective.

The screen Figure 6.7 shows the different options available on the eligibility rule.

 

Figure 6.7   Configuration of an Eligibility Rule

The eligibility rules can be defined based on:

  • Not eligible

You will be surprised to find the “Not Eligible” flag. This is very helpful to take care of the exceptions.

Minimum length of service:

You can set up a requirement for a minimum length of service. It might need at least 5 years of service before qualifying for a stock options plan. The calculation is based on formula already setup in IMG • Personnel Management • Personnel Administration • Evaluation Basis • Calculation of Employment period • Calculation Process • Define Calculation. This is integration with the Personnel administration. The calculation of service can be setup based on different criteria e.g. it can include or exclude sabbatical leaves.

Salary criteria:

There are 2 methods that are available. One is the salary range and other is compensation ratio (Compa-ratio). Depending on the preference, you can decide what you want to use.

You can define that only those employees are eligible who are getting paid between the midpoint of the salary range and maximum of the salary range. This will be defined by entering the minimum as 50% and maximum as 100%. The system calculates the salary percentage using the formula (current sal. – min. in range)/(max. in range – min. in range) * 100. In terms of compa-ratio, the calculation is employee’s salary divided by reference salary of the level. For e.g. if the reference salary of a level is 75,000 and the employee’s salary is 77,000, then the compa-ratio is 0.96 (72,000/ 75,000)

Minimum working hours of the employee:

The minimum working hours is compared to the number of working hours on IT 0007. If the minimum working hours is set to 32 hours/ week, then a part-time employee with 20 working hours would not be eligible for this plan.

Waiting period before an employee can become eligible:

We can define a waiting period before an employee can become eligible. We can specify it from the hire date or calculate it with the infotype 0041 Date types. 

Employee’s performance (appraisal rule)

The Appraisal Rule is defined separately because it has a lot more variables. The appraisal rule can be created based on the old appraisal system or new Management by Objective (MBO) system. When we use the old appraisal system, it’s easily done by defining the Appraisal model e.g. Annual Performance Review.

 

Figure 6.8   Setting up Appraisal Rule

With Management by objective system, there are more choices. The evaluation can be for the overall rating for the template or for the second or third level element in the appraisal.

 

Figure 6.9   Setting up appraisal rule with MBO

Let’s review an example of annual bonus plan. We will create an annual bonus eligibility variant. This variant will have 3 eligibility rules, one for each grouping.

  • Executive

Salaried

Hourly

Executives are eligible for an annual bonus, after a one month waiting period after they are hired and if they have a performance rating of at least 4.

 

Figure 6.10   Executive Employee Eligibility Rule

Salaried employees are eligible after a two month waiting period and if they have a performance rating of at least 4.

 

Figure 6.11   Salaried Employee Eligibility Rule

Hourly employees are not eligible for the annual bonus.

 

Figure 6.12   Hourly Employee Eligibility Rule

The PERF appraisal rule is defined as in Figure 6.13   Performance Appraisal Rule

 

Figure 6.13   Performance Appraisal Rule

Eligibility rule periods

Eligibility rules are date sensitive. If necessary, you can change current parameters to different dates. That is, if salaried employees’ eligibility waiting period changes from two months to one month for the year 2009, you can change the period and apply the new rule.

 

Figure 6.14   Eligibility Rule Periods

Let’s now look at the concept and definition of eligibility variants.

In addition, there can be custom requirements on which micro eligibility is based.

6.3      Defining Eligibility Variants

Each compensation plan has an eligibility variant assigned to it. The eligibility variant is a combination of macro and micro eligibility, that is, it is a combination of eligibility groupings and eligibility rules.

 

Figure 6.15   Methods of defining Eligibility Variants

We can define as many eligibility variants as we want. It is not necessary that they all have to be used immediately. They can remain in the system and can be used subsequently.

Though the same eligibility variant to be reused for different plans, it is preferable to use one eligibility variant for one plan. This is to ensure that if we need to change the eligibility on one plan but not the other, we don’t have to make changes or accidentally apply the change to all the plans.

Eligibility Override

The standard eligibility definitions are expected to take care of most of the scenarios but like in any other things in life, there are exceptions. ECM provides with the simplest of the solution, it provides with an eligibility override at an employee level. There can be scenarios where an employee has been transferred from one country to another. In this cases, the employee might not fulfill all the country specific eligibility criteria but is still expected to be eligible for some of the compensation plans. This is accomplished by creating an infotype 0760 and specifying the plan.

The same logic can be reversed and if there are employees who come up as eligible but they need to be made ineligible, we can still use IT 0760.

6.4      Eligibility Rule Configuration

Follow this sequence of steps to configure eligibility rules beginning with the IMG:

Personnel Management •EnterpriseCompensation Management • Compensation Administration • Eligibility

The screen shown in Figure 6.16 is the eligibility configuration.

 

Figure 6.16   Configuration for Eligibility Rules

Step 1: Define eligibility rule variants within a compensation area. Each compensation will have it’s own set of eligibility rules. We can’t copy eligibility variants across different compensation areas. We can translate the description in other languages if required. You can add more variants anytime you need them. They are created in line with the compensation plan that are going to be used for.

 

Figure 6.17   Define Eligibility Variants

Step 2: Define eligibility groupings

The eligible groups are defined here. There is a lot of work that needs to be done in the background to ensure that all the groups have been considered. You can only assign eligibility rules for each of the groups defined here. If there is anything that gets missed, it will be a lot of work to make changes. The eligibility groupings are used in all the eligibility variants. If it’s changed, it will impact all the variants.

 

Figure 6.18   Define Eligibility Groupings

The above process just defines the shell, the feature CELGP provides the actual employee population that will be assigned to eligibility grouping. It can be any combination of the decision fields available. But there are some caveats. If the eligibility doesn’t work as expected, you would need to check the compensation area feature and tweak some decision fields to avoid any overlap.

 

Figure 6.19   Define Eligibility Grouping Feature CELGP

Step 4: Define appraisal rule.

We will define the appraisal rule name first and then define the details of the appraisal rule. Again, we can define it based on the plan or create more readable titles.

 

Figure 6.20   Define Appraisal Rule

 

Figure 6.21   Setting up Appraisal Rule

The rule can be defined for the old appraisal system or new management by objective. The range of ratings can also be included as a part of the rule.

Step 6: Define eligibility rule.

Everything comes together when we are defining the eligibility rule. We will first choose a compensation area and the eligibility variant to which this rule belongs to. Then we will create the rule with the eligibility group along with the eligibility parameters.

 

Figure 6.22   Define Eligibility Rule

 

Figure 6.23   Executive Employee Eligibility Rule

Step 7: If eligibility can’t be define using standard configuration, activate the Business Add-In.

 

Figure 6.24   Eligibility Business Add-In

6.5      Summary

Designing eligibility rules is a challenging task. There are many options that are available that to implement standard eligibility but we can also use the BAdI. There is quite a bit of configuration that needs to be done to leverage the complete functionality.

We have covered the following topics:

Eligibility variant

Eligibility groupings

Eligibility rules

Appraisal rules

Eligibility BAdI

5- Defining Compensation Programs

Compensation programs are a group of compensation plans that an employee is eligible based on the employee groupings by the company. In essence, the use of compensation program is another way that ECM uses to simplify management of compensation.

We would definitely need to introduce the concept of compensation plans but before that we need to introduce the concept of compensation programs. We will start with the happy path and then dwell into the exceptions in later chapters.

 In this chapter, we will define all the core objects that are required to setup ECM. The core objects are compensation areas, compensation program and compensation plans. These components will need to align with the strategy of the company with respect to compensation management. They also need to be defined. Once they are defined, we can then go ahead with more transactional part of ECM.

Compensation Area

Compensation Area is an SAP ECM specific term. It is the starting point for compensation administration in ECM. Compensation area groups employees that follow the same compensation process with respect to an area. Compensation area operates on a higher level and hence it is recommended to keep them generic. Eligibility groupings are available later for more specific groupings. Compensation area on a country seems to be the logical choice to group people for this.

 

Figure 5.1   Compensation Areas

If the employee is in the US, they will have the compensation area of ‘10’ and all the plans that get assigned to this compensation area will be available to the employee. Within SAP 10 is the country code for US. It is very important to note the difference between available and eligibility. If the compensation plan for the US is ‘Annual bonus plan US’, each and every employee in the US can have it but the eligibility criteria on the Annual bonus plan drives who is really eligibility for the plan. Anyone outside of US can’t have this plan.

 

Figure 5.2   Compensation area assignment

Compensation area can be defined based on other criteria. The list below is a comprehensive list of the fields available. It includes the fields that form the core structures in SAP viz. personnel structure, enterprise structure, organizational structure, pay structure.

 

Figure 5.3   Compensation area options

The definition for compensation area will also drive the definition of eligibility groupings and guideline groupings later on. They have to be properly aligned for overall eligibility to work.

If this is not sufficient to create the appropriate compensation areas, then ECM also provides with BAdI HRECM00_CARGP. You can use it to create your own compensation areas assignment. It is important to note that you could use the standard feature described above in conjunction with the BAdI. Though once you activate the BAdI, the system will always execute the BAdI, you can still call the standard feature when you want to do that and you can define your logic when you want to do that.

An employee will have a default compensation area they belong to but it is also possible for the employees to belong to multiple compensation areas. For e.g. A US executive will belong to compensation area 10 and also compensation area Z1 (global compensation).

Compensation Plan

Compensation plan is the key entity and means the same in business terms as well as ECM. Compensation plans like Annual Merit Increase, Annual Bonus plan, etc… are very common. There are also other plans like stock options plan for senior executives. Each plan has it’s own eligibility requirements and award guidelines.

Compensation program grouping

Compensation program grouping defines the employee groupings that need to be worked on. In this step, you maintain first compensation program groupings. Such groupings, which are used in infotype Compensation Program (0758), enable you, in combination with second compensation program groupings, to differentiate employees for compensation purposes on the basis of various attributes. By doing so, you determine whether or not employees belonging to different combinations are eligible for different compensation plans.

5.1      Mapping Compensation programs to SAP ECM

Compensation programs of a company need to be mapped within ECM. ECM requires each parameter to be captured and configured into the system for optimum results. There is a lot of work that needs to be done upfront for optimum results. The system is very flexible yet rigid in certain requirements. Though you can have many compensation programs as you want, you have to clearly define them before you can use them in ECM.

5.2      Configuration

5.2.1       Plan Name

It’s important to clearly define the compensation plans. They should line up with the company’s compensation plans. The compensation plans are differentiated based on whether they are one time payments like bonuses or whether they increase the base pay. There are other types of non-monetary plans like stock option plans. The reason for the different kinds of plans is to motivate people at different levels and also to get their commitment for a longer period of time using vesting schedules.

There is a review period when the employees are evaluated against the compensation plans they are eligible for and are awarded their fair share.

Company’s compensation plan

It’s always a good idea to align the SAP system with the existing company’s plan since it will ensure that there is as little confusion as possible. Also it’s a good idea of companies to re-engineer their processes sometime before initiating an ECM project. There are instances where re-engineering is coupled with new system. In this case, it is very important to manage scope changes and scope creeps.

There are 4 types of compensation plans. They are:

  • Basic pay changes like merit increase
  • Additional payments like performance bonus
  • Off cycle increase like recognition rewards
  • Long Term Incentives like stock options

Each compensation plan is created in the system along with their types.

 

Figure 5.4   Compensation Plan

5.2.2       Plan Attributes

 There are different compensation plans with different eligibility requirements, guideline requirements etc… These parameters are attached with the configuration:

 

Figure 5.5   Compensation Plan attributes assignment

Each plan has eligibility and guideline variants. They are optional. If they are not attached the macro eligibility is used for eligibility and no guidelines for awards are provided. Also rounding rules are optional. Integration with PCP is also optional.

Compensation plans pretty much remain constant e.g. Annual Merit increase, Annual Bonus etc.. but the eligibility, guidelines, awards etc… can change over  period of time. This can be accomplished by changing these parameters for different periods.

 

Figure 5.6   Changing the compensation attributes from 01/01/2009

In the above scenario, we delimit the existing date range and created a new date range from 01/01/2009 and have added a new guideline and rounding rule.

5.2.3       Setting up the Calculation Base

The calculation base is an important attribute of the plan since it’s used when there is a calculation involved. If the merit increase is 3% than the question is 3% of what amount. The calculation base is normally the salary of the employee. ECM provides the flexibility to choose the calculated wage type that you need. In certain cases in the US, you might want to use the ASAL as the calculation base or CSAL as the base.

 

Figure 5.7   Calculation base

The compensation component provides the wage type that needs to be updated for a specific compensation plan in a specific country. In the screen shot above we have taken the country grouping for MOLGA=10 (US).

The calculation base is ASAL (annual salary) in this case but there are other options that are available depending on the requirement.

ASAL includes the basic salary and CSAL includes basic salary and bonus. They are setup as a part of base wage type setting in personnel administration.

In certain case the calculation base is not a straight forward calculated wage type that we can use. E.g. the calculation base needs to be picked from other infotype. This could be one of the reason to use the BAdI.

 

Figure 5.8   Calculation base BAdI

5.3      Compensation program

Once the compensation area has been decided, the next step begin with the macro eligibility of an employee for a compensation plan. Normally, you would have a broad grouping of employees viz. Executives, salaried, union, that are provided with different compensation plans. The compensation program helps define the compensation plans for that high level of grouping. The compensation program of Salaried employees would include annual merit increase and annual bonus plan. The compensation program of the executive employees would include stock options, annual merit increase and annual bonus plan.

Each employee is grouped using the compensation program assignments. There are 2 such groupings (similar to the older benefits module). Each compensation program is assigned within a compensation area.

In the US, we will create the first grouping that includes all the employees and second grouping that groups the executives and non-executives

 

Figure 5.9   First Compensation Grouping

The first compensation program grouping is defined based on the compensation areas. The compensation areas have already been grouped by employees in the US(Molga “10”) and the are being defined “All”. We can do this consistently for all the other countries in case of a global implementation.

 

Figure 5.10   First compensation grouping assignment

In case the first grouping requirements can’t be met with the feature, ECM provides BAdI HRECM00_CP1GP that can be customized. It’s highly unlikely that we would need to use BAdI for such a high level grouping.

 

Figure 5.11   First compensation grouping BAdI

The second compensation grouping setup is the same as the first. We can drill down on more level and differentiate between Executives and other.

 

Figure 5.12   Second compensation program grouping

Again, we start with the compensation area that defines the US employees and then create another level of grouping based on the jobs.

 

Figure 5.13   Second compensation program grouping assignment

There is also the BAdI available for second compensation program grouping if we have very specific criteria that are not available in the feature. For example: if custom infotype is created to define different groups of people.

If the US Executives have a compensation program that includes Executive bonus, restricted stock, Salary increase and Stock options, then ECM compensation program will be defined as follows:

 

Figure 5.14   Compensation program for Executives

For all the other US employees, regular bonus and Fixed salary adjustments are the only type of compensation plans available.

 

Figure 5.15   Compensation programs for others

5.4      Technical Points

5.4.1       Object/ Infotype details

The employee’s Compensation program is stored on infotype 0758. Once the groupings have been setup, the next step is to create the compensation program infotype for each employee. Transaction PECM_CREATE_0758 is executed. The same program is executed using the R/3 or the portal.

 

Figure 5.16   Creating compensation program infotype

If you leave the compensation area/ 1st program grouping/ 2nd program grouping blank, the system will check the feature and populate the record with one record. Other applicable records need to be created manually.

The record created will be like the one given below.

 

Figure 5.17   Compensation program record for the employee

Any employee can have multiple compensation program record. It means that the employee can be a part of different compensation programs. Though only one can be defaulted, you can manually create records for the other compensation programs.

5.4.2       Limitations

5.5      Defining Compensation Review

Compensation review defines the review cycle in which a group of plans are reviewed together. It can be defined for a specific period of time or can be done anytime.

Review Period: This period is when the compensation review can take place. This will in turn drive what is available for the MSS selection.

Selection Period: The employees are selected from this period. The employees who are hired after 12/31/2007 will not be included.

 

Figure 5.18   Compensation Review configuration

This means that this compensation review will only be available for the period of 01/01/2008 to 02/29/2008. After that it will not be available to the manager.

Only those compensation reviews will be available that are either Anytime review or the current system date in the Review period.

 

Figure 5.19   How does compensation plan review dates impact the MSS?

5.6      Defining compensation review items

Compensation review items are the actual items that the employee is reviewed on. A compensation review item is defined by a unique combination of compensation plan and compensation review.

 

Figure 5.20   Defining Compensation Review Item.

In the above example, the review item is Salary review 2008 that is for salary adjustment for the review period of 2008. In case of anytime review, there would not be a need to have yearly review items. Every year a new review item has to be created since the review period is different and needs to be added. The plan can continue to remain the same.

 

Figure 5.21   Configuration of Compensation Review Item

This is one of the most important configurations for the compensation. It addresses:

  1. When the award should be paid (Effective date)?
  2. What is the eligibility period?
  3. What is the date for the guidelines?
  4. What is the date for the base calculation?
  5. What is the currency conversion key date?
  6. What is the budget type that should be impacted?
  7. What is the reason for the change?
  8. What is the frequency of awards?
  9. What are the messages that should be given in case errors?

Effective date of the award: There are different ways to default it. One is to have a fixed date, second is to have an anniversary date that is picked up from the IT 0041 –Date specification. We can define the range of anniversary dates that can be considered for review.

Eligibility date:  The eligibility key date is the key date for evaluating the eligibility of an employee or a group of employees. The evaluation period begin date is used for evaluation of eligibility and the period is used for calculating the pro-ration of the payout amount.

Threshold period: The threshold period field specifies the required minimum length of the program period for an employee to be macro eligible.

The guideline key date: This date determines the effective date for evaluating the guidelines. It can be a fixed date or the current effective date or the program period date. The program period date enables you to set the guideline key date as the end date of a program period, that is, the timeframe needed for calculating a prorated amount and for which an employee is macro eligible for a compensation plan. Use this option to prorate over two periods when, for example, the employee has held two different positions and is eligible for the same compensation plan but with different guideline percentages.

The other key date includes calculation base key date. This date can be kept anything but normally it can be the last effective date of the period. This will ensure that all the salary changes for that year are accounted for. The currency conversion key date is the date on which the currency conversions will be performed.

The processing and activation parameters define the budget type, reason for change and the unit of time.

The types of message defines whether there should be an error message or warning message or information message when there is budget overrun, a guideline overrun or when we are going to make changes to an inactive employee.

 

Figure 5.22   Budget and Award links

The effective date on the MSS is from the configuration of effective date in the compensation review item.

If the effective date can’t be determined by ‘Fixed date’ or ‘Anniversay date’ then we would need to use the BAdI. For example: if the effective date needs to be first day of the pay period after February.

 

Figure 5.23   Business add-in to determine the effective date

If there is stock splits that are planned and can’t be handled using the standard stock split mechanism, the BAdI will need to be used.

 

Figure 5.24   Business add-in to determine stock units

5.7      Summary

This section has covered the core aspect of compensation programs. We have covered ECM-specific compensation area, compensation plans and compensation programs. It is important to note that these components are a part of the bigger picture. As we go through the subsequent chapters, these components will fit in.

4. Part 2- Budgeting

Budgeting is a very useful though optional functionality for compensation management. Budgeting helps in managing and distributing the compensation money across the organization. The compensation specialists compile data, run through different what-if scenarios to come with a budget for a compensation plan. Traditionally, spreadsheets have been used for most of the work but SAP also provides Personnel Cost Planning module to facilitate this process sometimes called funding a plan. Once the funds are approved, they become budget and are loaded in to the system. If there are employee movements after the budget has been approved, the budgets can be reassigned even after they have been released.
These options are provided using the Compensation Budgeting Portal option of Budget maintenance. The compensation specialist would have access to this.

 

Figure 4.34   Initial Budgeting Screen

4.2.1       Creating the Budget Structure

By pressing the ‘Create’ button we can start the process of creating a new budget. We can select the budget type, budget period, top organizational unit to begin the budget from and the depth till which the budget should be created. The column ‘Units’ will be used in case we are use stock based rewards. Once all the values are entered and we click save, the budget units are created. Budget units are SAP objects that make budgeting possible. Each budget directly finances the organizational unit it is connected to and any organizational unit under it that doesn’t have a budget unit. In the simplest form, one budget unit can be assigned to the top most organizational unit and the rest of the organizational units will get their allocations deducted from the big pot. If we create budget for each of the organizational unit, we will have the ability to assign budgets to each organizational unit and the hierarchy created automatically forms the budget hierarchy.

 

Figure 4.35   Creating Budgets

There are 3 steps in budget maintenance

V   Creating the budget structure by copying from existing organization structure

Modifying the budget structure

Populating the budget amounts

Copying from existing Organizational Structure

It’s very easy to create the budget structure. The following information is needed:

Budget type- We have an Annual bonus budget that is going to be used in the year 2008 for the performance in the year 2007.

Budget period- This needs to be clear. It refers to the year when the budget will be used. The plan’s other values like eligibility and awards would be applicable for 2007.

Org unitID- This refers to the highest level of org unit that we want to budget from. If the org unit ID is known, it can be entered otherwise help can be used to search for the org unit ID.

Depth- This is important to understand the impact. If we keep it zero, budget structure will be created for each of the org units in the hierarchy. If we keep it 3, then it will create budget units up to 3 levels from the highest level  This is preferred in some companies where the managers at a lower level in the hierarchy don’t have a separate budget but align to a bigger pool from senior managers.

Unit- This is applicable with Long term incentives.

 

Figure 4.36   Create a budget structure

The output is a complete budget structure financing the organizational structure. The system allows you to add the total budget. The distributable budget at a org unit level is calculated by total budget at the org unit level less the total budget under it’s hierarchy. The budget unit 50039103 is financing the Org unit 00000300 Executive Board-USA. The budgeting works bottom-up. You assign the budget to the lower level budget unit.

 

Figure 4.37   Budget structure financing the Organizational structure

Modifying the Budget structure

The budget structure can be modified where we can create/ delete budget units or add/ remove financing relationships.

We can add more budget units to the existing structure. Select the budget unit under which you want to add a sub-budget unit • click ‘Create’ • Provide the name and abbreviation of the budget unit • click ‘Save’. The budget unit will get added and it’s a good idea to click ‘Collapse all’ and then reopen the structure.

 

Figure 4.38   Modify budget structure to add budget unit

To move another budget unit under ‘Support Service’ budget unit, you have to first ‘Delete Assignment’ and then ‘Assign Budget’ to the ‘Support Service’

 

Figure 4.39   Reassign budget

This maintenance helps in creating different budget structure than an existing organizational structure. Though it’s not recommended, it might come in handy in case of exceptions.

When creating a org structure automatically, one budget unit is created for each and every org unit. It might not be required in certain cases. Multiple org units can be attached to one budget unit.

Note: Saving the changes

You will always have to click save that is on the top left to save any changes you make to the structure. Though not very intuitive, any change the you see on the portal screen is not committed till you click that save button. It’s like the master save button for any budget structure changes.

 

Figure 4.40   Assigning multiple org units to one budget unit

The organizational unit of Hospitality and Operations is being financed by the one budget unit of Operations.

Populating the budget structure

Once we have created the budget hierarchy, we can start assigning the budget amounts. You can click on any budget unit and add the budget amounts.

There are multiple ways of adding the budget amounts.

V  Manually add the budget amounts using the Portal

Automatically transfer budget amounts from PCP

 

Figure 4.41  Different options to update the budget amounts

Manually add the budget amounts using the portal

The manual process can work in 2 ways. Each individual manager can enter their own budgets and then we can hit roll-up on the top-level budget unit to create the overall budget.

 

Figure 4.42   Manually entering the budget amount

The compensation specialist can do different scenario planning using Personnel Cost Planning. PCP is a totally different topic by itself but has this link with ECM to update the budget. There is ‘Import PCP data” option.

 

Figure 4.43   Using Import PCP data to update the budget amounts

There is also a custom option. It provides a BAdI for companies to write their own custom logic to populate the budget structures.

Using Personnel Cost Planning

Assigning the budget amounts takes place using the ‘Budget Details’ tab. We can import it from PCP, use custom import using the BAdI, Roll-up values or change the existing values with a percentage change.

 

Figure 4.44   Assign budget amounts

Note: Budgeting in R/3

Though not recommended, you can do Budget maintenance through R/3 too. You can use the transactions HRCMP0011, HRCMP0012 and HRCMP0013 to create, change and display budget structures and budget amounts.

4.2.2       Check & release budget

Once the budget amounts have been assigned and before the managers start awarding their people, it’s required that the budget be checked for consistency and then released.

 

Figure 4.45   Check & Release the budget

Releasing the budget

It’s important to release the budget before allowing the managers to start awarding. If the budget is not released and the managers start awarding then it will cause inconsistency in the database and it’s very difficult to fix the problem. By default, the system doesn’t stop managers from awarding but does give a warning message stating that there is no budget assignment.

When we try to release budget just for the ‘Ft Worth Sales’, the system gives a message that it can’t be done and the entire budget structure has to be released. In our case we have to release it from the Executive Board-US.

 

Figure 4.46   Releasing the budget for entire structure only

The budget can be reset to planning if the money has not yet been distributed.

 

Figure 4.47   Reset the budget to planning again

The Budget unit ID 50039053 has been reset along with the budget structure under it.

There are instances when an employee might move from one organization to another before or after the award has been assigned but before it’s been paid out. In this case, it still possible to re-assign the money from one organizational unit to another. This is a requirement in many companies so that the manager of the organizational unit have their budgets reflected correctly. The sending manager gives up the budget for that employee and the receiving manager gets the budget. This helps in ensuring that the receiving manager doesn’t run short of money due to an additional employee under their hierarchy. At the same time, the sending manager doesn’t have extra money since there is one less employee under them.

 

Figure 4.48   Budget reassignment

 

Figure 4.49   Budget reassignment process

The budget reassignment process is a 4 step process. First we chose the sending org unit, then we chose the receiving org unit, then we enter the amount that needs to be reassigned, then we review and approve the change.

We will first select the organizational unit (not the budget unit) that the transferring employee belongs to currently. Then we click ‘Next Step’

 

Figure 4.50   Selecting the sending organizational unit

We will now select the receiving organizational unit that the employee will belong to. Click ‘next step’

 

Figure 4.51   Selecting the receiving organizational unit

You would then assign the new budget amounts and click ‘Reassign’. You can reassign existing budget or spent budget.

 

Figure 4.52   Reassign budget

Finally you will see the change that can be saved by click ‘Save’ on the top.

 

Figure 4.53   Reviewing the change of the budget

All this is happening in the front-end but there are some settings that need to be configured before all these can happen.

4.2.3       Configuration

In this section we will review the budget configuration. The budget configuration needs to be reviewed every year to ensure that the right budget period is available to carry out the compensation plans.

 

Figure 4.54   Budgeting Configuration

The budgeting configuration has limited options. Budgeting is more data intensive than configuration intensive. It also provides an add-in to initialize budget values.

Reference currency:

This is important to convert data into single reference currency. It is useful when the budget are managed in different currencies but requires conversion into single currency viz currency of corporate HQ. At any given point in time there can only be single reference currency for compensation management.

 

Figure 4.55   Reference currency

Budget types

Budget types allow allocation of different budgets to the compensation programs. They are monetary or units based and they might be available for allocation or not. When money has to be distributed, it’s assigned as ‘Monetary Budget”. When number of stocks, options etc… has to be distributed, we will not check this option. When we are ready to start allocation of budget amount/ numbers, ‘Allocation” flag has to be checked. Different budgets are created for different plans. One budget can be assigned to multiple plans but one plan can only be assigned to one budget.

 

Figure 4.56   Budget types

Global Impact of languages:

The budget types can be translated in multiple languages so that the same can be used in multiple languages. This allows the same type of budget to be used in multiple countries easily.

 

Figure 4.57   Budget type description in different languages

The critical setting for budget is to setup the budget period. This period defines the period for which a budget is spent. It’s setup in conjunction with the compensation plan and the budget type.

 

Figure 4.58   Budget Periods

The budget period is the period during which you distribute the salary increases or distribute the bonus/shares.

The key date refers to the date on which you want currency conversion to take place in case you have budgets in multiple currencies. If it’s left blank then the currency conversion will take place when you create the budget units.

System Switches for budgeting

There are 2 system switches for budgeting that is applicable across the system and have to be decided irrespective of compensation plans.

 

Figure 4.59  System switches for budgeting

VI  HRECM- BDGRA- Reassignment of budget allowed after the budget has been spent.

In this field, you determine whether you can reassign budgets or budget amounts.

Possible entries Explanation
‘ ‘ (empty) If this field is empty, the system checks if any part of this budget has already been spent. If so, you cannot reassign this budget.
‘X’ If this field is checked, this means that you can reassign this budget, even if part of it has already been spent.

VII       PCOMP-MGBUD- Budget of line manager. If the budget of the line manager is assigned to org units they belong to

Possible entries Explanation
‘ ‘ (empty) The budget of the line manager’s organizational unit is used. If there is no budget, the budget of the next highest organizational unit (for which a budget exists), is used. That is, the line manager of the organizational unit must be paid from the same budget as the other employees in the organizational unit.ExampleLine manager 1 executes compensation administration for line manager 2, who has a budget available for his/her organizational unit. The budget for the adjustment amount comes from the organizational unit of line manager 2; that is, budget 2.
‘X’ The budget of the next highest organizational unit (for which a budget is available) is used. In other words, the line manager of an organizational unit is paid from a different budget to the other employees in the organizational unit.ExampleLine manager 1 executes compensation administration for line manager 2, who has a budget available for his/her organizational unit. The budget for the adjustment amount comes from line manager 1’s organizational unit; that is, budget 1.

Business Add-Ins to enable budget load

ECM also provides for business add-ins to upload your enterprise’s initial budget values from another source (for example, spreadsheet or database), into the Budget Values infotype (1520). The values can be amounts for monetary budgets or numbers for stock based budgets.

You need to add your own code changes in order to upload these budget values.

 

Figure 4.60   BAdI for initializing budget values

The import parameters defines the budget that needs to be updated. The export parameters define the new budget values for the budget.

Example

Method: DETERMINE_BUDGET_VALUES

Import parameters Meaning
plvar Plan variant
butyp Budget type
begda Begin date of budget
endda End date of budget
kcurr Monetary budget indicator
budot Object type of budget unit, usually ‘BU’
budid Budget unit id
oldam Old budget amount
oldcu Old budget currency
oldno Old budget number
oldsu Old budget stock unit
Export parameters Meaning
newam New budget amount
newcu New budget currency
newno New budget number
newsu New budget stock unit

Hints:

If parameter kcurr is set to ‘X’, this is a monetary budget. Therefore you can only return an amount and a currency. If a number or stock unit is returned, SAP will generate an error.

If parameter kcurr is set to ‘ ‘, then it is a non-monetary budget and you can only return a number and a stock unit. If an amount or stock unit is returned, SAP will generate an error.  When returning an amount or number, you must also return the currency and the stock unit respectively.

Using R/3

It’s expected that we would use the portal to do everything in ECM. But the underlying structure that’s been used for budgeting is the same one that was used for the old compensation management, we could use R/3 functions for budgeting. This is not the case for Job pricing where it’s not really possible to use R/3 effectively.

In case you want to manage some aspects of budgeting from R/3, use can use the following transaction PECM_GENERATE_BUDGET

 

Figure 4.61   Creating budget in R/3

We can also use the Transaction PECM_INIT_BUDGET, to initialize the budget from Personnel cost planning.

 

Figure 4.62   Getting budgets from Personnel Cost Planning

We can use more detailed selection to upload from Personnel Cost Planning.

 

Figure 4.63   Using different parameters to get the right PCP plan

We can Transaction PECM_DISPLAY_BUDGETS to display the status of the budget planned and budget used.

 

Figure 4.64   Displaying the budget units with budget & utilization reporting

Sometimes its more helpful to view the budget structure along with the organizational structure they are financing.

 

Figure 4.65   Displaying the budget units with the attached org units along with budget and utilization.

We can use the Transaction PECM_CHK_BUDGET, to check and release the budget.

 

Figure 4.66   Checking and releasing budgets from R/3

We can use the Transaction PECM_CONV_BDG_STKUN, to convert the stock units e.g. the conversion might be triggered due to stock split in the company.

 

Figure 4.67   Converting budget from old stock units to new ones.

4.3      Summary

In this chapter we covered the different aspects of budgeting. Budgeting is a key process. We reviewed different steps in managing the budget and configuration for budgeting. We also reviewed the flexibility in terms of currencies supported by budgeting.

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