Advanced Compensation Plans and Process Overview PDF

# Compensation for Administrators ## Chapter 7 - Advanced Compensation Plans and Process Overview ### Overview * The compensation structure is divided into two functional areas: core compensation and advanced compensation. * Advanced compensation includes merit, bonus, and stock plans, as well as...

# Compensation for Administrators ## Chapter 7 - Advanced Compensation Plans and Process Overview ### Overview * The compensation structure is divided into two functional areas: core compensation and advanced compensation. * Advanced compensation includes merit, bonus, and stock plans, as well as the process to complete awards. * The Initiate Compensation Review Process business process conducts a compensation review. * The compensation review is an inclusive process that includes administrators, managers, planners, and reviewers to propose employee awards. ### Objectives By the end of this chapter you will be able to: - Discuss merit, bonus, and stock plans. - Describe the Compensation Review Process. - Propose awards in a Compensation Review Process. ### Advanced Compensation Plans Overview | Plan | Definition | |----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Merit | Merit is an award for an increase to an employee's base pay. Merit is typically an annual process that can include promotions, additional adjustments, and lump sums. | | Bonus | When including bonus in a compensation review, review eligible employees for a payment in addition to their base pay. Bonuses occur monthly or quarterly. | | Stock | When including stock in a compensation review, review eligible employees for a stock award or options. Workday does not process stock vesting and grant data. | #### Merit Plans - When creating a merit plan, you can include eligibility rules, individual targets, employee review data, proration, rounding rules, and waiting periods. - When creating the merit plan, you can set default percentages or amount increase. You can also define merit plan profiles, which assign different merit targets to a population defined by compensation eligibility rules. - The target percent is calculated using the employee's total base pay. **Configuration Options** | Configuration Option | Definition | |---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Use as Reference Only | Available when you include a compensation matrix. Select if you do not want the individual target or the pool amount calculated using the matrix. If selected, Workday only displays the guidelines when proposing the award. | | Allow Target Override | Permit the entry of a target percent for an individual employee assigned to this plan. This makes the individual target field available for entry during compensation staffing events. | | Hide Target | Hide target from specific security groups (e.g. employees or managers). | | Time Proration Rule | Prorate the merit increase based on the proration rule. The rule can include one type of proration or a combination of proration options. | | Rounding Rule | Allows a merit award to be rounded up or down based on the rule you configure. | | Waiting Period | A waiting period unit can be in days, weeks, months, or years and can be calculated based on many options. A commonly used wait period is based on time since the employee's hire date. | | Include Active Employees Assigned Plan During Process Period | Select this checkbox to pull employees into the merit process if they are assigned to the merit plan during the process period. The process period is defined based on the process period end date entered when initiating compensation review, and the start date of the process period defined by the plan's reference frequency. | | Include Active Employees in Waiting Period | Select this checkbox if you want to include employees who are not eligible to participate due to a wait period. Their targets will default to zero, but managers would have discretion to award them a pay increase. | ## Bonus Plans - Bonus plans are either amount or percent plans. - Within a bonus plan, you can define targets using plan profiles. **Configuration Options** | Field | Definition | |--------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Compensation Basis | When calculating a percent award, you can select Eligible Earning Override, Total Base Pay, or any configured compensation basis. | | Company Funding Scorecard | If you run a bonus process, you can use a compensation scorecard to assist in adjusting the overall bonus pool based on company metrics and results you define. | | Plan Modifier Scorecard | The plan, individual performance, and scorecards can have modifiers. | | Time Proration Rule | There are many types of proration that you can select. A proration rule can include one type of proration, or more than one in combination. | | Rounding Rule | Rounding rules round the final calculation of an employee's bonus award amount. | #### Bonus Plan Profiles - A bonus plan profile allows you to vary the bonus target based on an additional compensation target rule. - Below are a few examples of bonus plan profiles: | Target Amount | Currency | Eligibility Rule | |--------------|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | 5000 | EUR | Current Business Site - Paris AND Non-Management | | 8000 | USD | Current Business Site - Dallas AND Non-Management | | 10000 | USD | Current JFJP - Management | ## Plan and Process Eligibility An employee's participation in the compensation review is dependent on two factors: - Is the plan in the employee's compensation? - Is the employee in a waiting period? **Note:** An eligibility rule will determine who is eligible, and will allow a bonus plan to default during a staffing event. If the bonus plan defaults and then manually removed, the employee is technically still eligible. However, they are not participating and will not be in the compensation review. **Configuration Options** | Field | Definition | |----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Waiting Period | A period in which you may have a bonus plan included in your compensation, but you may not be eligible to participate in the process. | | Include Active Employees Assigned Plan during Process Period | If selected, an employee in a bonus plan for a portion of the process period, they are not in the plan, but they are in the process. | | Include Active Employees in Waiting Period | Select this option if employees are in a waiting period, but you still want them in the process. No budget allocations are available. This option is only available if using waiting periods. | ## Stock Plans - There are three types of stock plans: - **Amount-Based:** Defines a target currency amount, which is then converts to shares based on the strike price or price per share. Rounding rules may be necessary to calculate the exact number of shares. - **Percent-Based:** Defines a percent of the designated compensation basis. Rounding rules may be necessary to calculate the exact number of shares. - **Unit-Based:** Sets a number of shares as the target. When using the override feature, this target changes for individual employees. **Stock Plan Configuration Options** | Field | Definition | |--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Use as Reference Only | Available when you include a compensation matrix. Select this checkbox if you do not want the individual target or the pool amount calculated using the matrix. If selected, Workday only displays the guidelines when proposing the award. | | Rounding Rule | Only available for amount-based and percent-based plans. When Workday calculates the number of shares, the result may not be an even number. Rounding rules dictate how to round the number. | | Use Target Currency for Grant | Only available for amount-based plans only. Selecting this checkbox will cause stock grants to display in the currency of the employee's plan target in business processes. | | Target Amount/Percent/Shares Frequency | This is the default target for the stock plan, and editable for an employee using the Allow Target Override checkbox. | | Vesting Schedule | Select the rule that will determine the vesting date for the stock grant. Before using the Maintain Stock Vesting Schedules task, you must create the rule. | | Grant Type | Enter multiple stock grant types. Before using the Maintain Stock Vesting Schedules task, you must create the grant types. | | Expiration Date Rule | Select the rule that defines when the grant type expires. This value must equal 100, so if you have more than one grant type together, they must equal 100%. | | Percent of Target | This value must equal 100, so if you have more than one grant type together, they must equal 100%. | ### Maintain Stock Grant Types - Stock grants are in Workday, you can view the date using the Stock Grants Summary report, which pulls this information using: - Board Approval Status - Overall Process Status - Stock Plans (multiselect) - Employee(s) (multiselect) ### Add or Request a Stock Grant - An individual employee can receive a stock grant through the Request Stock Grant business process. This process has two different initiation steps: - Request Stock Grant is for manager self-service. - Add Stock Grant is for compensation partners or Compensation administrators. - Based on the structure of a stock plan as a percent-, amount-, or unit-based plan, the configured targets will populate, but is editable. - The Add Stock Grant task includes all the information a compensation administrator or compensation partner typically enters after a manager initiates the request. Initiate this task for one employee or use it as a web service to load stock grants for multiple employees. #### Add Stock Grant Configuration Options | Field | Definition | |----------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | A percent or amount granted | | | Grant Date | | | Vest from Date | | | Grant Price | | | Currency | | | Options Pricing Factor | | | Expiration Date | | | Grant ID | | | Board Approved? checkbox | | - You can also load stock awards into Workday using the Enterprise Interface Builder (EIB). An EIB can update employee stock grants from a spreadsheet generated by Workday. ### Board Approval - When requesting a grant, or using the Initiate Compensation Review Process to award stock, you can indicate if the grants are board-approved. - As the stock grant request moves from the board approval status of Pending to Approved, Workday makes the award visible to the employee on their worker profile. - The Update Stock Grants task will add grant price, grant date, and board approval status to an individual stock grant request or a stock grant process. ### Compensation Review Process The process of awarding merit, bonus, and stock is the compensation review process. The compensation review process allows you to: - Schedule and plan for compensation milestones. - Configure the organization type and roles with authority to create, edit, or review awards. - Continue to make staffing changes during the compensation review. - Manage pool budgets. - Use eligibility rules to target employee populations. - Provide transparency and identification of people responsible for planning, approving, and review awards. **Compensation Review Process Workflow** - Compensation Administrator - Defines Plans. - Compensation Administrator - Assigns Plans to Employees. - Compensation Administrator - Budget & Launch - Planner - Propose - Planner + Reviewer or Up the Chain (Optional) - Approve, Modify, Audit - Controller - Control - Employee Award - Performance - Finalize - Payroll **You will use the Initiate Compensation Review Process business process definition to conduct the compensation review. You can plan and schedule regular compensation reviews for:** - Annual reviews for merit, bonus, and stock. - Semiannual or quarterly bonus reviews. - Periodic reviews for stock to better align with the company's fiscal cycle. ### Compensation Review Statements - You can easily generate and make compensation review statements available to administrators, managers, and employees before, on, or after the effective date of a compensation review process. - Workday provides three compensation review statement formats that you can locate on Workday Community. You can also create custom statements by defining a business form layout using Workday tasks and Report Designer in Workday Studio. - **Resource/Glossary:** Review the Workday Administrator Guide documentation for information about setting up Workday-delivered or customized compensation review statements. - **Search Reference:** - Compensation Review Statement - Steps: Create Custom Compensation Review Statements - **SAMPLE COMPENSATION REVIEW STATEMENTS** - The following is one example of a Workday delivered compensation review statement layout. #### Release Compensation Review Statements - Administrators and managers can easily make compensation review statements visible to their employees using the Release Compensation Review Statement task. This task provides greater control over when statements are available to employees. - The Release Compensation Review Statement task can be part of a compensation review, a standalone task, or a report. It generates a PDF version of the compensation review statements. Once you select the Generate Statement PDF checkbox, you can schedule the statement to run and print. - For each compensation review process with a future-dated effective date or future-dated employee visibility date, use the Set Compensation Review Statement Visibility task to set the statement visibility date. After running Release Compensation Review Statement, or before either the effective date or employee visibility date on the compensation review, you can run Set Compensation Review Statement Visibility. This is only if the effective date or employee visibility date are in the future. You will not need to or be able to run the Set Compensation Review Statement Visibility task if the effective date or employee visibility date has passed. Running this optional task allows for the statement to be visible to employees immediately. If you do not run the Set Compensation Review Statement Visibility task, the statements become visible to employees on the latest of either the effective date or the employee visibility date on the compensation review process. - You can configure these options using the Edit Tenant Setup - HCM task. Select the Hide Create New Compensation Review Statement button for Employee on View Merit Statement History to prevent employees from creating their own compensation review statement. #### View Compensation Review Statements - The View Compensation Review Statements report allows you to access, generate, and print statements for multiple employees. #### Additional Training: - For additional training on how to create custom Compensation Review Statement layouts, enroll in the Workday Report Designer (BIRT) Learn Virtual training. - For additional learning on the Compensation Review Process, Release Statements, and Merit, Bonus, and Stock plans, enroll in the Advanced Compensation Fundamentals training. ## Knowledge Check 1. True or False? Stock options can only be awarded for an individual employee. 2. True or False? All compensation plans, excluding merit and stock plans, must be linked to a compensation element. 3. True or False? The Update Stock Grants task is used to enter information, such as grant price and board approval, for individual stock awards or for a population. 4. Rounding rules can be used when creating which of the following compensation plans? (Select three correct answers.) - One-Time Payment Plans - Merit Plans - Bonus Plans - Stock Plans 5. True or False? A percentage-based bonus and merit plan can be configured to calculate using any delivered or configured compensation basis.