Manish's Blog

About SAP HR, Rebuilding HR and other topics

“Why do I have to do everything but he gets away by doing nothing?”

You hear this many times on the project: ‘Why do I have to do everything but he gets away doing nothing?’ I recently read a research article in Project Management Journal. Though it’s very detailed and the language is very research oriented, I think it covers some of the things that every project manager thinks. It doesn’t offer concrete answers but validates many of the reasons related to free-riding.

Counteracting FreeRiding With Team Morale—An Experimental Study He 2012 Project Management Journal Wiley Online Library.

Definition of Free-riding

Free-riding, also labeled as a social trap (Platt, 1973), commons problem (Edney, 1980), commons dilemma (Dawes, McTavish, & Shaklee, 1977), assurance problem (Runge, 1984), social loafing (Karau & Williams, 1993; Orbell & Dawes, 1981), and moral hazard in teams (Anesi, 2009), refers to an undesired behavior in which a member of a group obtains benefits from group membership but does not bear a proportional share of the costs of providing the benefits (Albanese & Van Fleet, 1985). Free-riding deteriorates team productivity by tempting team members to be free-riders and shirk from collective actions.


Provider: John Wiley & Sons, Ltd
Content:text/plain; charset=”UTF-8″

AU  – He, Jun
TI  – Counteracting Free-Riding With Team Morale—An Experimental Study
JO  – Project Management Journal
JA  – Proj Mgmt Jrnl
VL  – 43
IS  – 3
PB  – Wiley Subscription Services, Inc., A Wiley Company
SN  – 1938-9507
UR  –
DO  – 10.1002/pmj.21272
SP  – 62
EP  – 75
KW  – free-riding
KW  – organizational citizenship behavior
KW  – team cognition
KW  – team morale
KW  – team performance
PY  – 2012
AB  – This study focuses on a behavioral perspective to examine the detrimental effects of free-riding on team performance, and investigates team morale as a key factor that counteracts the tendency of free-riding among team members. Results of the empirical test imply that enhancing team morale can effectively reduce the scale of free-riding behavior in project teams; in addition, controlling team size also provides help to constrain the undesired behavior. The two means can be carefully applied to project management during early stages of project development before the commitment of significant resources. Implications for both research and team practices are discussed.
ER  –


HR Access controls- fire fighters, superusers, …

Compliance and controls are important. It should start as soon as the project starts and shouldn’t wait till the end.

SAP has Governance, Risk and Compliance (GRC) module to help in this effort. Follow the link, SAP GRC AC 5.3 Integrated Project Plan in MS Project, for a good starting point for Access Control.

Can I know who is speaking?

I have spend a lot of time on global projects. It translates into many hours on conference calls with people from different countries working in different time zones. The corporate headquarters normally moderates the meeting and try to rotate the timing to make it convinient for their teams. The following guidelines might be helpful to keep the team members on the calls engaged:

  1. Conference call details along with international connect numbers and toll free numbers should be provided. It would be great to have a small verification call to ensure that they work for the participants.
  2. Good audio conferenceing equipment should be used so that people on the conference call feel part of the discussion going on in the conference room
  3. If there is a side bar conversation, the moderator should summarize and repeat the same for the audience on the conference call
  4. Every participant should tell their names before speaking.
  5. There should be web conference that simaltenously displays what’s being presented in conference room.
  6. If offline documents are referred, the moderator should regularly inform where they are on the document.
  7. Moderator should ask for questions from the audience on the conference calls at the end of each section to ensure getting the feedback
  8. Whenever possible, the moderator should denote where they are on the agenda and time.

These are just a few that I realized when I was not at the moderating end but on the receiveing end… Let me know what your experience has been.

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.

Why I changed the title?

When I started, I thought ‘Human Capital’ was a good title. As I started to blog, I realized that I had to post my blogs based on the topic I wrote. This is becoming a little inconvinient to me. I am hoping to use this space to write all my blogs.

Gathering business requirements

Business requirements are the starting point of any project. Progressively it becomes difficult to keep up traceability from business requirements to delivered system functionality. Sometimes it becomes too late the see the gaps or too expensive to bridge the gap.

We lose a clear trace to business requirements since they are captured in a Microsoft Word document. Word is not an ideal way to track requirements.  I would suggest that a database should manage and maintain all the business requirements.

It would be good to have each need numbered. All tasks, information, build should be assigned to a requirement number. Consistently tracking what we build and getting the business users involved, will lead to better results. is a place you can start the exploring a structured way to list all requirements.

Additionally, I had come across a small template that could be a good start to design the requirements. You can find more info at

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.


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

The transactions for ECM are:

Transaction Description
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_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_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.

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