What You Need to Know About SAP SuccessFactors Compensation and Variable Pay Solutions

Published: 01/October/2017

Reading time: 11 mins

Panelist: Jeremy Masters

Date: Thursday, October 5

Are evaluating or implementing compensation management solutions for your workforce? HR 2017 speaker Jeremy Masters answered questions on how SAP SuccessFactors Compensation and Variable Pay can help you achieve your objectives in order to deliver a corporate-wide employee compensation management solution for merit, bonus, and stock programs. Read the transcript for expert advice on the modules from both technical and business perspectives. Jeremy answered questions such as:

What are the similarities and differences between the SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay modules?
How can we configure core functionality such as eligibility, guidelines, and budgets within a compensation template?
How does SAP SuccessFactors Compensation and Variable Pay integrate with SAP ERP HCM and SAP SuccessFactors Employee Central?
How does SAP Performance Management integrate with the compensation solutions from SAP SuccessFactors?
What calibration functionalities does the solution offer out-of-the-box?
What reporting capabilities come standard with the solution?

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Matthew Shea

Hello, everyone. Welcome to today’s live Q&A on SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay solutions. I am excited to be joined by Jeremy Masters.

Matthew Shea

Thank you for joining us, Jeremy.

Comment From Josh

How does SAP Performance Management integrate with the SAP SuccessFactors Compensation solution?

Jeremy Masters:

Hi, Josh,

SAP Performance Management (from on-premise SAP HCM) does not natively integrate with SAP SuccessFactors. Typically, we just download the ratings and upload them into the Employee Profile (Live Profile) so that SAP SuccessFactors Compensation or SAP SuccessFactors Variable Pay can read them.

If you were referring to SAP SuccessFactors Performance Management, this natively integrates with SAP SuccessFactors Compensation or SAP SuccessFactors Variable Pay solutions. This is done via the compensation template configuration under Admin Center > Compensation Home > [Template Name] > Plan Setup > Plan Details > Rating Sources.

Comment From Bas

What are the similarities and differences between the SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay modules?

Jeremy Masters:

SAP SuccessFactors Compensation is for merit, stock, and basic bonus plans. SAP SuccessFactors Variable Pay is for more complex bonus plans that require you to calculate a bonus based on segments, rows, legs, or assignments (whatever you want to call it) along the bonus plan year. For example, your bonus target might change along with your bonus plan type or bonus objectives if you are promoted to a different area within the company. Under your plan design, if this scenario creates “segments” (or, as SuccessFactors likes to call them, “assignments”) that means your bonus plan is a good candidate for SAP SuccessFactors Variable Pay. Segments can be handled in the compensation template, but only for more straightforward bonus schemes.

Comment From Ruben

Do you have any experience with the new point-in-time calculation for bonus? I believe this feature disables assignment-based calculations. Is that right?

Jeremy Masters:

Correct, Ruben. Point-in-time calculation (which just became available during the last release) would be used for those scenarios where assignments segmentation or calculations are not needed.

Comment From Andrew

How can we configure core functionality such as eligibility, guidelines, and budgets within a compensation template?

Jeremy Masters:

All those core functionalities can be configured within the compensation template. This is done via the compensation template configuration under Admin Center > Compensation Home > [Template Name] > Plan Setup > Plan Details. The various options are there.

Comment From Craig

What calibration functionalities does the solution offer out of the box?

Jeremy Masters:

Out-of-the-box calibration functionality is nothing to get excited about. The calibration functionality piggy-backs off the standard calibration matrix, but it is fairly limited with how to apply in real-life scenarios for in-cycle compensation calibration.

What I typically recommend to customers is that they should become very familiar with the Executive Review functionality in SAP SuccessFactors Compensation or SAP SuccessFactors Variable Pay since this is really the only place in the tool out of the box where high-level leaders can look at their data and then sort, filter, and export this data to Excel for further analysis.

Comment From Josh

How does SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay integrate with SAP ERP HCM and SAP SuccessFactors Employee Central?

Jeremy Masters:

SAP provides integration with both SAP ERP HCM and SAP SuccessFactors Employee Central for its SAP SuccessFactors Compensation solutions. Integration with SAP ERP HCM is provided with add-ons 1.0 and 3.0 (the latter for SAP SuccessFactors Variable Pay). You can download these add-ons using your SAP User Account (S-user ID) here: https://help.sap.com/viewer/p/SFIHCM. This integration involves either your SAP middleware (SAP NetWeaver Process Integration) or SAP HANA Cloud Platform, integration (SAP’s middleware in the cloud).

For integration with SAP SuccessFactors Employee Central, the integration is native to the product, so there will be no files exchanged or middleware involved. Rather, the two modules exchange information via mapping (in the compensation template) and publishing the compensation results back to the Compensation Information portlet within SAP SuccessFactors Employee Central.

Comment From Deran

What reporting capabilities come standard with the solution?

Jeremy Masters:

Hi, Deran,

You have a few available reporting options that come standard within the solution:

Detailed Report: This option provides drill-down capabilities for managers during the planning process. It is available only from the compensation worksheets during the planning cycle. It provides roll-up budget total, spend, and remaining information in percent and amounts.
Executive Review: This option provides aggregate views of Compensation Planning Information. It can be enabled for “edit” access (I recommend very limited use of this access). It can use filters to cut data and can be used to export data into comma-separated value (CSV) files or Excel spreadsheets. Generally, this option meets the reporting needs of most users.
Ad-Hoc Reporting: This basic reporting tool features spreadsheet-based output. It also is used for integrating files to other systems. It enables users to aggregate, but not create visualizations. In SAP SuccessFactors Compensation, this tool is generally limited to administrators for edit access, and managers are given run access. Sharing of reports is not dynamic based on criteria.
Variable Pay Validation Reports (for SAP SuccessFactors Variable Pay only): This standard packaged report in Excel or CSV format offers the following reporting features: Eligibility and Proration, Business Goal Performance, Individual Preview, “Other Reports.” The reports are not configurable and generally access for editing is available to administrators only.
On-Line Report Designer (ORD): This robust reporting solution allows queries, pivots, visualizations, report layout, and styling. It also features advanced sharing capability. This solution is considerably more advanced to use versus Ad-Hoc Reporting. Information can be viewed in real time. Typically, edit access is only for administrators, and run access is for managers.

Comment From Jyoti Sharma

Regarding the SAP SuccessFactors Compensation and SAP SuccessFactors Employee Central roadmap, what are the key areas companies ought to watch out for if they have a staggered SAP SuccessFactors Employee Central deployment, but are looking for quick wins on SAP SuccessFactors Compensation?

Jeremy Masters:

Here are three points to consider:

Ensure that you have defined your pay grade and salary ranges correctly in SAP SuccessFactors Employee Central. This step is important if you want this information to flow over to SAP SuccessFactors Compensation. All too often I see this as an afterthought, and this step is hard to undo if it is not set up correctly.
Ensure that all pay components in SAP SuccessFactors Employee Central are defined even for compensation-related pay components. For example, pay components for lump-sum payments are frequently missed during an SAP SuccessFactors Employee Central deployment without SAP SuccessFactors Compensation. The same applies to Incentive compensation pay components
Users should read about the planning hierarchy options they have with SAP SuccessFactors Compensation and how this affects the planning experience. What I am talking about here is Standard Suite Hierarchy, Roll-Up Hierarchy, or Second Manager (or Compensation Manager) Hierarchy. The implications on processes that occur for your compensation cycle will vary depending on which option you select. This decision should be made early and should be done alongside your SAP SuccessFactors Employee Central team.

Comment From Cindy

If you are providing edit access for Executive Review, is there an audit trail of changes made during that process and identification of who made the changes? If so, how is this audit trail accessed?

Jeremy Masters:

Hi, Cindy,

Yes, there is an audit trail for all changes to the planning (even during the Executive Review). However, if you haven’t already done so, you need to request that the Compensation Activity Audit Report be turned on for your instance that you want it for.

You will want to look at the SAP Knowledge Base for more details on this in the SAP Knowledge Base Article 2084156 – Comp Audit Functionality – Compensation and Variable Pay https://launchpad.support.sap.com/#/notes/2084156. You will need an S-user ID to log in.

Comment From Don

Are there metric packs available for SAP SuccessFactors Workforce Analytics?

Jeremy Masters:

Hi, Don,

Yes, there are. You can see information about SAP SuccessFactors Workforce Analytics and SAP SuccessFactors Compensation in SAP Knowledge Base Article 2500926 – Analytics and Reporting Functionality Overview as per 1705 https://launchpad.support.sap.com/#/notes/2500926.

There’s also some ORD template downloads located in the community site here: https://community.successfactors.com/t5/Reporting-and-Analytics-Product/bg-p/WorkforceAnalyticsProductResources.

Comment From Guest

When a manager has access to Executive Review, does he or she have access to all employees in that compensation plan, or can this access be reduced with authorization to a specific group of employees?

Jeremy Masters:

Executive Review access is based on access defined in the Role-Based Permissions (RBPs). This means that the manager will see only the employees in the compensation template to which he or she has been granted access.

Comment From Julio

What are some quick wins to improve our compensation planning process with these solutions?

Jeremy Masters:

Hi, Julio,

That’s a great question. Here are a few quick wins that I can think of:

Reduce the approval process steps. If you currently have multi-level approval (two or more approvals for a form or worksheet), consider having only the planning manager submit and only the approving manager review or approve. Since all managers within your hierarchy will have access to the Executive Review, it behooves you to consider only having this one-step workflow so that the planning process can go faster.
Reduce the number of columns that you really want to show to managers. Oftentimes, we present 20 to 30 columns to the manager; this many columns frequently becomes information overload to the planning managers. Think about which information (columns) is really needed for effective decision-making.
Ensure that you effectively use the Executive Review. This functionality is typically under-leveraged. I’ve written a few more things about the Executive Review that you can read here on my personal blog: SuccessFactors Compensation – Executive Review Export/Import Functionality
As I mentioned above, it is so important to understand which planning hierarchy you are going to use (Standard, Roll-Up, Second Manager, or Compensation Manager).I don’t have a preferred method; this really depends on the organization — that is, how far down the planners go, and how much you need the organization to be dynamic versus frozen during your compensation cycle.

Comment From Renaud

What are your recommended best practices for administering equity granting during the compensation process?

Jeremy Masters:

Well, the standard equity or stock process in SAP SuccessFactors Compensation is based on units or shares and not on value. Of course, we know that in today’s marketplace, much equity granting is done based on value (and not stock units). You can overcome this by configuring an equity template such as a salary template, but you will need to configure some clever custom columns and lookup tables.

As far as best practices, I would say that you should leave only the granting side of things in SAP SuccessFactors and leave the splits (back to units) based on stock price or the Black-Scholes model outside of the tool. You can include these, but if you are going to be sending these to your third party anyway, you can do them outside. The only time you would want to do them in the tool is if you had to include some them on the employee’s compensation statement.

Comment From Don

Jeremy, do the SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay solutions support the day-to-day management of compensation or are they typically used as an annual event?

Jeremy Masters:

Hi Don,

The SAP SuccessFactors Compensation and SAP SuccessFactors Variable Pay solutions are typically used for the annual (or quarterly) processes. You would not use these solutions for off-cycle payments such as equity or market increases or promotions.

Comment From Guest

Could you point me to a good resource to understand Pay Components and Groups as they relate to SAP SuccessFactors Compensation? I was wondering how we apply increases to some base pay components and not others. For example, annual salary consists of base salary plus a Christmas bonus grocery allowance. However, when the increase is applied only to the base salary and the Christmas bonus is increased, how are the new results reflected in Payroll and SAP SuccessFactors Employee Central?

Jeremy Masters:

Your best bet for resources on this would be information in the SAP SuccessFactors Employee Central, SAP SuccessFactors Compensation, and SAP SuccessFactors Variable Pay Integration guides, which can be found here (with your S-user IDs: https://help.sap.com/viewer/4b243325e2444067b4ad597e25e56850/1708/en-US and https://help.sap.com/viewer/bf61437930374da6a5fa50802e41a366/1708/en-US

Comment From Chris

What are your main thoughts on configuring pay grades and employee stock ownership plans? Any pitfalls to beware of regarding those two topics? Thanks.

Jeremy Masters:

Yikes! Good questions, Chris. Let me start with pay grades. From a compensation perspective, I don’t have strong feelings directionally on how these are configured. My only caution is that during the setup of pay grades in SAP SuccessFactors Employee Central (assuming you are using this solution), ensure that you have configured those pay grades in combination with the salary ranges. This is important from an SAP SuccessFactors Compensation perspective since this information is what integrates back into SAP SuccessFactors Compensation for merit planning purposes.

Regarding stock ownership plans, to be frank, I haven’t ever handled this within the tool. I suppose this could be configured with only the manager-initiated long-term incentive plan (LTIP) — performance shares, equity, stock, etc. — being implemented or managed versus an employee-based stock plan. (Refer back to Josh’s question, “How does SAP Performance Management integrate with the compensation solutions from SAP SuccessFactors?”)

Comment From Richel

For managers with a global team, how should they take into account country differences in using either base or total annual salary wage types as the base for salary review?

Jeremy Masters:

Hi, Richel,

This is a really good question. A planning basis is a big deal; thanks for bringing this up. For a global population, much of the world plans on a monthly basis versus an annual basis. This needs to be considered when doing your plan setup and can be achieved within the functionality. In most cases, custom columns are needed to make this happen, but it’s possible.

It’s also important to ensure that the budget is accurately reflecting these changes. This is again configured at the template level in the configuration, but should be part of the overall discussion.

Matthew Shea

Jeremy, you will be speaking at HR 2017 in Copenhagen. What should attendees look for in your sessions?

Jeremy Masters:

Matt, thanks to SAPInsider for hosting me today, and I am really looking forward to Copenhagen next month where I will be speaking on the following topics:

Attendees should be looking for some real-life examples of the questions, comments, and issues that have come up today. That’s why I love this conference so much, and why I have been participating in it for 10 years. We have a great lineup of speakers this year in a great city. Hope to see some of you there.

Stay awesome.
Jeremy

Find me on Twitter @jeremymasters