Fixed compensation plans are where the compensation grids and pay rate conversion, along with rules about how strictly the values in the compensation grid should be adhered to. As you might expect, these are legal entity specific too, and they created under Compensation management > Links > Fixed compensation > Fixed compensation plans. To create a new plan, hit ‘New’.
When you start setting up your plans, it’s worth thinking about your pay review process. For example, I once worked with a customer with step plans who processed two increments per year. One in January and one in July. Employees who had joined between January and June got their increment on 1 January every year, and employees who joined between July and December got their increment on 1 July every year. This ensured that everyone waited at least 6 months and no longer than 12 months to receive their first increment. The result was essentially two annual pay review processes, and two groups of staff – the 1 January increment group and the 1 July increment group. When running compensation processes, you need to indicate which plans should be included. To allow for the two groups, we created two versions of the same plan – one for January increments and one for July increments. Employees were assigned to the correct plan accordingly at the point of joining, and each compensation process took in workers on one or the other of the plans.
The fields on the plan form impact as follows:
Effective and expiry dates – the plan must be active at all times when it’s assigned to workers. So if your first worker receives a salary in this plan on 1 August 2015, the start date of the plan must be before that, and the end date after the plan is no longer needed.
Type – select the type of plan you’re creating based on the guidance provided so far. The option selected here will impact on the availability of other forms in the field, and which compensation grids you’re able to select from.
Recommendation allowed – only available for band and grade plans, becomes significant when running a pay process. If you have this set to yes, you can override the calculated guideline result of the compensation process. For example – you run a process granting a 5% increase to employees on the plan as the agreed increase for this group of workers. However some workers need manual adjustment. This is done while the compensation process results are at the ‘created’ stage before they are approved and ultimately loaded to the worker.
Out of range tolerance – only available for band and grade plans, indicates how strictly the pay values should be adhered to. There are 3 options; soft – which will generate a warning if the limits are exceeded but will still let you proceed, hard – which will generate an error if the limits are exceeded, and none – which will ignore the limits all together and let you enter anything you like.
Hire rule – indicates what happens when a fixed compensation action of type ‘merit’ is carried out on a worker who has not been employed for a full cycle. Two options here; percent – which means that a proportionate increase will be applied based on the duration between the hire date and the cycle end date, and none – which will ignore the fact that the worker has only been employed for part of the year and award a full increase).
Currency – allows you to select the currency value which will be used when pay rates are recorded against this plan.
Pay rate conversion – indicates which calculations should be used when converting between annual, monthly, weekly, hourly pay rates – using the setup you completed earlier.
Compensation structure – this is where you select the pay grid that will be applied to workers assigned to this plan. To populate the field you first have to save the record and then click ‘set up compensation’ on the ribbon. You’re given 3 options:
- Set up a new compensation matrix (the terms matrix and grid are used interchangeably which is a little confusing) – this is useful if you haven’t followed the steps in this guide and therefore don’t already have your compensation grid set up. Selecting this option will take you back to the compensation grid setup form.
- Create new from existing compensation matrix – unsurprisingly this creates a brand new grid, but takes the values from a previously created grid which you can then edit. Useful if the broad setup is the same but the values are different. Particularly useful if you’re creating a version of a grid in a different currency – because it allows you to copy the structure, but the new grid is created using the currency on the plan that it was created from. You can then update the values for the new currency (being careful because the grid is pre-populated with the values from the original currency).
- Use existing compensation matrix – my favourite because by now I’ve already set my grids up. Creates a relationship between the plan and the previously defined grid.
Control point – only available for band and grade plans – allows you to pick the reference point which should be used as the control point for each level (remembering that the control point is used in a few handy visuals). Think of the control point as the target pay rate for each level, and therefore by extension, each job.
Range utilisation matrix – again only available for band and grade plans. This can supposedly help you adjust your pay reviews to guide pay towards the control point, as it can be used as an option to calculate pay increases during a compensation process. To be honest I haven’t yet discovered where that option is in the compensation process or how you would use it, and as I haven’t yet had a customer need it, I haven’t bothered to find out. I’ll look into it. No harm in leaving this whole section empty.
One last step before you can start applying this plan to workers – eligibility rules.