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If a budget is associated with a compensation plan, and guidelines are established for the compensation component, compensation amounts for eligible employees are automatically populated according to the performance rating.
The manager involved with a compensation plan rollout defines compensation changes for each employee, specifying which direct reports receive merit, promotion, variable pay, and stock compensation. For each compensation-specific view, the Roll Up and Roll Down buttons allow the manager to roll up all compensation plans, or roll them down, according to a previously established hierarchy.
This topic is a step in Process of Setting Up Compensation Planning.
When a compensation component value is adjusted, the proposed compensation is compared against the guidelines, and if the amount is above or below the recommended amount, an indicator appears in the Guidelines field. The Compa Ratio is also calculated.
Figure 10 shows the Guidelines field for a group of eligible employees within the merit compensation component. In records where compensation exceeds the guidelines, a plus sign appears. If the compensation is below the amount recommended in the guideline, a minus sign appears. If the compensation is within the recommended range, the field appears blank.
For example, if guidelines stipulate that for the individual, the merit increase should be between 4 and 8 percent, and the increase that is entered is 3.5, the guideline indicator (a minus sign) alerts the manager that the proposed merit increase is below the recommended target range for a rating of 1.1, and a compa ratio of 1. If the planned increase is 15%, the system signals that the proposed amount is outside the range of the amount established for the individual's peers.
Individuals that are significantly underpaid typically have a compa ratio of less than 1. If you sort employees that have the same job role by salary, the mid-range employee typically will have a compa ratio of 1. Having a compa ratio below 1 may also mean that the individual was just promoted to the job role.
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