PeopleSoft HR 9.1 PeopleBook: Manage Variable Compensation

Setting Up Variable Compensation Plans

This chapter provides an overview of variable compensation plan types and discusses how to:

Define a variable compensation plan.
Assign payout formulas.
Set up goals, funding, and proration.

Understanding Variable Compensation Plan Types

When you define a variable compensation (VC) plan, you must specify its type. The system provides ten plan types. The topics in this section describe the unique steps required to set up plans in each of these categories. Additional setup options and procedures common to all plan types are in the discussion of the VC Plan setup pages.

This section discusses:

Monetary plan types.
Non-Monetary plan types.
Stock-type variable compensation plans.
Other plan types.

Monetary Plan Types

This describes the monetary plan types:

Discretionary Bonus

Select this type to label a plan for your own tracking. No special plan setup steps apply. Plan options are available according to the plan member rule.

Goal Sharing

Select either Weighted Goals or Matrix Goals and specify weighted goal percents or matrix columns on the Plan Definition page.

See Defining Goals.

Profit Sharing

Select this type to label a plan for your own tracking. No special plan setup steps apply. Plan options are available according to the plan member rule.

See Also

Defining a Variable Compensation Plan

Calculating Allocations and Awards

Processing Eligibility and Proration

Non-Monetary Plan Types

A non-monetary plan generates awards in terms of units rather than money. Use this plan type to manage the award of various kinds of gifts and merchandise to workers. The plan is administered in terms of units. Setup of valuation of units for reporting purposes.

To set up non-monetary plans:

Define units of non-monetary awards and the value per unit on the Valuations page.
Identify the number of units to be distributed to a worker on the Payout Formulas page.

Select Constant as the operand and enter the number of units in the Value/Rec/Rate Code column.
Set up a plan with a Non-Monetary plan type and select a valuation ID on the Plan Definition page.
Assign the payout formula to a worker, group, or plan.

Use the Non Monetary report to track the number of units awarded under a plan and the value to workers.

See Setting Up Data Elements.

Stock-Type Variable Compensation Plans

Stock-type variable compensation (VC) plans require setup of valuation and funding. Use goals and other optional plan rules. The system uses valuation only for variable compensation reporting purposes because stock prices can change so rapidly.

The variable compensation system provides five stock plan types for your organization's tracking purposes. Within the Variable Compensation business process, the system treats them all the same. Select one of these stock plan types:

Stock ISO	Incentive Stock Option
Stock NQ	Nonqualified Stock Option
Stock NSAR	Stock Appreciation Rights in tandem with a Nonqualified Stock Option
Stock RSA	Restricted Stock Award
Stock ISAR	Stock Appreciation Rights in tandem with an Incentive Stock Option

Stock-type variable compensation plans are supported only for users of PeopleSoft Stock Administration. The system provides specific functionality to support this integration.

Summary of Setting Up Stock-Type Plans

To set up stock-type plans:

Define valuation of stock units on the Valuations page.
Specify a stock ID and stock plan on the Plan Definition page.

The Stock administrator sets up stock IDs on the stock plans on the Stock Plan Table page.
Specify a valuation ID on the Plan Definition page.
Set up plan funding on the Plan Funding page.

See Setting Up Data Elements.

See Also

Creating a Stock ID

Defining Stock Purchase Plan Rules

Other Plan Types

Most plans fit into one of the named plan types. If you have a plan that is not described by one of these plan types, use the plan type Other. The Variable Compensation business process provides no specific functionality to support plans labeled Other, so we recommend selecting one of the remaining nine plan types whenever possible.

Defining a Variable Compensation Plan

To define variable compensation plans, use the Define Variable Comp Plan (VC_PLAN) component.

Use the three VC Plan setup pages to define a variable compensation plan as well as its options, business rules, and payout periods.

This section lists common elements used in this section and discusses how to:

Specify the VC plan definition.
Specify plan business rules.
Select termination status codes for the Employee VC Record Plan Member rule.
Define plan payout periods.

Common Elements Used in This Section

Plan ID	The unique identifier used to access many of the variable compensation pages. When you open a page, the system displays the ID that you entered to access the page.
Payout Period ID	An identifier for the payout period, such as Q1 for the first quarter. This is a key for many of the variable compensation pages.

Pages Used to Define a Variable Compensation Plan

Page Name	Definition Name	Navigation	Usage
Plan Definition	VC_PLAN_TBL	Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Definition Compensation, Variable Compensation, Maintain Plan, Define Variable Comp Plan, Plan Definition	Define a variable compensation plan, plan dates, earnings code, plan type, and specifics related to the plan type.
Plan Business Rules	VC_PLAN_BUS_RULE	Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Business Rules Compensation, Variable Compensation, Maintain Plan, Define Variable Comp Plan, Plan Business Rules	Specify the method of administering plan membership and select optional business rules for the plan.
VC Termination Status	VC_EE_TERM_STAT	Click the Emp Term Status link on the Plan Business Rules page.	Select the termination status codes that exclude workers from payment under a plan that has Empl VC Record as the plan member rule.
Plan Payout Periods	VC_PAYPRD_TBL	Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Payout Periods Compensation, Variable Compensation, Maintain Plan, Define Variable Comp Plan, Plan Payout Periods	Define or change the beginning and ending dates of the payout periods of a variable compensation plan.

Specifying the VC Plan Definition

Access the Plan Definition page (Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Definition).

Plan Start Date

Enter the date on which you want the plan to begin. After you save the plan definition, you cannot change this date.

For stock-type plans, this date cannot be earlier than the approval date of the stock plan.

Plan End Date

Enter the date on which you want the plan to end. After you save the plan definition, change the plan end date to a later date only if you want to extend the plan.

For stock-type plans, this date cannot be later than the expiration date of the stock plan.

Currency

Select the currency in which you want the system to calculate, display, and report allocations. For rollup purposes, you must select one currency for the plan. Payout is in the appropriate currency for the worker.

For stock-type plans, the default value is the currency code for the stock ID on the Stock Exchange table. The currency of the VC plan must match the currency of the stock plan.

Plan Type

Select from the available options: Discretionary Bonus, Goal Sharing, Non-Monetary, Other, Profit Sharing, Stock ISO, Stock NQ, Stock NSAR, Stock RSA, and Stock ISAR.

Fields Related to Plan Type

When you select a specific plan type, the system displays these additional fields:

Plan Type	Visible Fields
Discretionary Bonus	Plan Goals
Goal Sharing	Plan Goals
Non-Monetary	Valuation ID, Plan Goals
Other	Plan Goals
Stock (ISO, NQ, NSAR, RSA, and ISAR)	Plan Goals, Stock ID, Stock Plan, Valuation ID.

Plan Goals

Select the type of goal administration to use with the plan. Values are:

Goals Matrix: If you select this value, the Matrix Columns field appears in the Plan Details group box.
Weighted Goals: If you select this value, additional fields appear below in which you define weighting percentages for goal levels.

Stock ID

Enter the ID that applies to this plan. The system prompts you with values from the Stock table. This field does not appear if you do not use Stock Administration.

Stock Plan

Enter the ID that applies to this VC plan. This field does not appear if you do not use Stock Administration.

Plan Details

The plan definitions in this section of the page might change during the life of the plan. Insert a row and enter new data to modify a plan.

Earnings Code	Payroll reporting code. Applies to awards paid out through PeopleSoft Payroll for North America.
GP Earnings (global payroll earnings)	Payroll reporting code. Applies to awards paid out through Global Payroll.
Valuation ID	Select an ID from the available options, which the system prompts you with from the VC Valuation table. This field appears only if the plan type is Non-Monetary or one of the Stock types. The ID that you select must be defined with the same currency code as the currency code that you select for this plan ID. This field represents only the valuation ID. The system determines the monetary value associated with the valuation ID that is used to calculate the award value using the maximum effective-dated row on the VC Valuation table that is equal to or less than the payout period end date.
Matrix Columns	This field appears if you select Goals Matrix in the Plan Goals field. Select the number of columns that you will set up in your goals matrix: Three, Five, or Seven.

Goal Weights

In this group box, indicate the relative weighting of goals at each of the three goal levels: organization, group, and individual. The default weight is 0 percent at each level. Change the percent only for the levels of goals used by the plan. The sum of all levels must equal 100 percent.

Org Weight (organization weight)	Enter the relative percentage of organizational goals compared to other goals used in administering the plan.
Group Weight	Enter the relative percentage of group goals compared to other goals used in administering the plan. Indicate a weight for group goals only if the plan's Group Member Rule is Empl VC Rec with Groups or Define Tree Group, as specified on the Plan Business Rules page.
Ind Weight (individual weight)	Enter the relative percentage of individual goals compared to other goals used in administering the plan.
Total Weight	The system computes the totals of the percentages as you enter them at each level and displays the sum in the Total Weight field. Adjust the weights until the sum of all levels equals 100 percent.

Specifying Plan Business Rules

Access the Plan Business Rules page (Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Business Rules).

Plan Member Rule

Select the rule to use to administer membership under this VC plan: Ad Hoc Award, Empl VC Record (employee variable compensation record), Empl VC Record with Groups (employee variable compensation record with groups), and Define Tree/Group.

See Understanding Plan Member Rules.

Emp Term Status (employee termination status)

This link appears if you select Empl VC Record. Click to access the VC Termination Status page, where you select the termination status codes that exclude workers from payment under the plan.

Static Plan Rules

Static Plan Rules

These rules remain in effect for the life of the VC plan. You cannot change these rules by inserting a new row.

Carryover Awards

Select if you want to carry over balances at the worker level for unallocated awards. Selecting this check box enables the Carryover Balance, Accum Carryover (accumulated carryover), and Carryover Amount fields on the Allocate Awards page. The system maintains the carryover balance for the life of the plan.

Carryover is not an acceptable option for non-monetary and stock-type plans.

This field is unavailable if you've selected the Ad Hoc Award option as the Plan Member Rule.

Funded Plan

Select if you allocate a funding amount to the VC plan or are defining a stock-type plan.

Plan Details

The plan definitions that you select in this group box might change during the life of the plan. To modify a plan, insert a row and enter new data.

Calculate Proration	Select if you want to prorate eligibility under the plan. This check box is unavailable for entry if you selected the Ad Hoc Award option as the Plan Member Rule.
Gross-Up	Select if you want payroll to apply gross-up rules to award payouts under this plan.
Separate Check	Select if you want payroll to issue the awards on a check separate from the worker's normal paycheck. If you are processing awards through PeopleSoft Payroll for North America and you selected Gross-Up on this page, you must select Separate Check.
Approve Awards	Select if you want to approve awards by either of these methods: Run the Approve Awards or Approve Awards by Group process to approve or disapprove awards at the plan or group level. Designate an approver who can manually approve awards individually under the plan on the Allocate Awards page.
Approver	This field appears if you select Approve Awards for a plan that has Ad Hoc Award or Empl VC Record as the Plan Member Rule. Enter the ID of the person authorized to approve awards for the entire plan. The system displays the worker's name next to the employee ID that you enter. If you administer the plan using groups, the approver is established through VC group tree security, so the Approver field remains hidden.

Plan Tree

This group box appears on the page only if the Plan Member Rule is Empl VC Record with Groups or Define tree/Group.

Tree Name	Select the name of the VC Tree that you want to associate with this VC plan.
Group ID	The ID of the highest group on the tree that you select in Tree Name.

Selecting Termination Status Codes for the Employee VC Record Plan Member Rule

Access the VC Termination Status page (click the Emp Term Status link on the Plan Business Rules page).

Payroll Status

Select the payroll status values that cause a worker to be ineligible under the plan. The eligibility process excludes workers from the plan if they have a selected status on their Job record as of the eligibility evaluation date.

Values are Active, Deceased, Leave of Absence, Leave With Pay, Retired With Pay, Retired, Suspended, Terminated, Terminated With Pay, Terminated Pension Pay Out, Short Work Break, and Retired-Pension Administration.

These values are entered by default: Deceased, Retired With Pay, Retired, Terminated, Terminated With Pay, Terminated Pension Pay Out, and Retired-Pension Administration.

You can add and delete values to reflect the rules for each plan that you set up with the Empl VC Record plan member rule. These selections are not effective-dated.

See Also

Processing Eligibility and Proration

Defining Plan Payout Periods

Access the Plan Payout Periods page (Set Up HRMS, Product Related, Compensation, Variable Compensation, Define Variable Comp Plan, Plan Payout Periods).

The Plan Payout Period rows are unavailable for entry if the VC plan has expired or if any approved awards exist for that payout period.

Payout Periods

Payout Period ID

Enter an identifier for the payout period, such as Q1 for the first quarter.

Period Begin Date

Enter the beginning date of the payout period. As the default date, the system enters the day after the end date of the prior period. For example, if the end date of the prior period is 01/31/2000, the default begin date of the next period is 02/01/2000.

After you save the page, the system sorts the rows by period begin date.

Period End Date

Enter the last date in the payout period. If the date that you enter is later than the plan end date as defined on the Plan Definition page, the system issues the error message Period End Date must not exceed the Plan End Date of [selected plan end date].

If the period begin date of one period overlaps with the period end date of another period, the system issues the message Payout Period dates must not overlap.

Note. After you define the plan payout periods, you can define the eligibility proration periods if required.

See Defining Proration Periods.

Assigning Payout Formulas

To create and payout formulas, use the Plan Payouts (VC_PAYOUT) and Plan Payouts With Groups (VC_PAYOUT_WG) components.

This section provides an overview and discusses how to:

Assign payout formulas for Employee VC Record plans.
Assign payout formulas for plans with groups.

Note. If you are administering the plan using matrix goals, do not assign payout formulas on this page. Instead, associate payout formulas with the goals matrix on the Payout Schedule page.

Understanding Payout Formula Assignment and Processing

Depending upon the plan member rule, you can assign up to three payout formulas:

Minimum payout.

The minimum award that a plan or group member should receive.
Target payout.

The award a plan member would receive upon 100 percent completion of objectives.
Maximum payout.

The maximum award that a plan or group member should receive.

The Determine Allocation process calculates the target, minimum, and maximum awards. If the worker is eligible for the entire period, after the Calculate Awards process applies the performance factor to the target award, it compares the calculated award to the minimum and maximum awards.

If the calculated award is less than the minimum award, the process overwrites the calculated award with the minimum. If the calculated award exceeds the maximum, the process overwrites the calculated award with the maximum. When the process overwrites the calculated award with the minimum or maximum, it sets a Calculation Source indicator on the Allocate Awards page.

Deciding Which Payouts Page to Use

Use this table to determine which of the Plan Payouts pages to use:

Plan Rule	Plan Payouts Page
Ad Hoc	Do not assign payout formulas; instead, enter the award amount directly on the Allocate Awards page.
Employee VC Record	Use the Plan Payouts page to assign optional minimum and maximum payouts at the plan level. (Assign the Target Payout at the worker level on the Individual's Payout page.)
Employee VC Record with Groups	Use the Plan Payouts With Groups page to assign optional minimum and maximum payouts at the group level. (Assign the Target Payout at the worker level on the Individual's Payout page.)
Define Tree/Group	Use the Plan Payouts With Groups page. The system applies payouts established on this page to all members of the selected group and to child groups for which you do not specify otherwise.
Matrix Goals (with any plan member rule except Ad Hoc)	Do not use either of these pages; instead, associate payout formulas with the goals matrix on the Payout Schedule page.

See Also

Understanding Plan Member Rules

Pages Used to Assign Payout Formulas

Page Name	Definition Name	Navigation	Usage
Plan Payouts	VC_PAYOUT	Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts, Plan Payouts Compensation, Variable Compensation, Maintain Plan, Plan Payouts, Plan Payouts	Assign payout formulas at the minimum and maximum levels under the plan. Plans that use matrix goals or ad hoc membership are not available. Use this page if the Plan Member Rule is Empl VC Record.
Plan Payouts With Groups	VC_PAYOUT_WG	Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts With Groups, Plan Payouts With Groups Compensation, Variable Compensation, Maintain Plan, Plan Payouts w/ Groups, Plan Payouts With Groups	Assign payout formulas at the target, minimum, and maximum levels under the plan. Plans that use matrix goals are not available.

Page Name

Definition Name

Navigation

Usage

Plan Payouts

VC_PAYOUT

Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts, Plan Payouts
Compensation, Variable Compensation, Maintain Plan, Plan Payouts, Plan Payouts

Assign payout formulas at the minimum and maximum levels under the plan. Plans that use matrix goals or ad hoc membership are not available.

Use this page if the Plan Member Rule is Empl VC Record.

Plan Payouts With Groups

VC_PAYOUT_WG

Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts With Groups, Plan Payouts With Groups
Compensation, Variable Compensation, Maintain Plan, Plan Payouts w/ Groups, Plan Payouts With Groups

Assign payout formulas at the target, minimum, and maximum levels under the plan. Plans that use matrix goals are not available.

Assigning Payout Formulas for Employee VC Record Plans

Access the Plan Payouts page (Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts, Plan Payouts).

Payout Values

To establish a payout, select a payout formula from the available options. The system prompts you with values from the Payout Formula table (VC_PAYFORM_TBL). All payout fields are unavailable for entry if awards have been approved, manually altered, or sent for payout or distribution for the period during which the effective date falls.

The system applies the payout to all members of the plan.

Availability of Fields

Depending on the Plan Member Rule, some fields are unavailable for entry and some fields are optional, as summarized in this table:

Field	Empl VC Record	Ad Hoc Award
Minimum Payout	Optional field.	Field unavailable for entry.
Target Payout	Field unavailable for entry. Set the target payout at the worker level on the Individual's Payout page.	Field unavailable for entry. Enter the award at the worker level directly on the Allocate Awards page.
Maximum Payout	Optional field.	Field unavailable for entry.

Assigning Payout Formulas for Plans with Groups

Access the Plan Payouts With Groups page (Set Up HRMS, Product Related, Compensation, Variable Compensation, Plan Payouts With Groups, Plan Payouts With Groups).

Group ID

Select an ID from the available options, which are groups in the VC Tree that you specified for the plan. The default group ID is the root group of the tree.

Set the payouts for the highest group to which it applies. The system automatically applies the payout to all child groups in the tree unless a specific payout formula is applied to a child group.

Payout Values Per Group

To establish a payout, select a payout formula from the available options. The system prompts you with values from the Payout Formula table (VC_PAYFORM_TBL). No payout fields are available for entry if awards have been approved or sent for payout or distribution for the period during which the effective date falls.

The system applies the payout to all members of the selected group and its child groups if you do not define payouts at lower levels on the tree.

Depending on the Plan Member Rule, some fields are unavailable for entry and some fields are optional, as summarized in this table:

Field	Empl VC Record with Groups	Define Tree/Group
Minimum Payout	Optional field.	Optional field.
Target Payout	Field unavailable for entry. Set the target payout at the worker level on the Individual's Payout page.	Required field except when the plan uses matrix goals.
Maximum Payout	Optional field.	Optional field.

Setting Up Goals, Funding, and Proration

Depending on the plan type, plan options, and plan business rules that you defined on the VC Plan setup pages, you might have to set up goals, funding, or proration periods.

See Also

Setting Up and Using Weighted Goals

Setting Up and Using Matrix Goals

Funding Variable Compensation Plans and Groups

Setting Up Eligibility Proration Tables

Plan Start Date	Enter the date on which you want the plan to begin. After you save the plan definition, you cannot change this date. For stock-type plans, this date cannot be earlier than the approval date of the stock plan.
Plan End Date	Enter the date on which you want the plan to end. After you save the plan definition, change the plan end date to a later date only if you want to extend the plan. For stock-type plans, this date cannot be later than the expiration date of the stock plan.
Currency	Select the currency in which you want the system to calculate, display, and report allocations. For rollup purposes, you must select one currency for the plan. Payout is in the appropriate currency for the worker. For stock-type plans, the default value is the currency code for the stock ID on the Stock Exchange table. The currency of the VC plan must match the currency of the stock plan.
Plan Type	Select from the available options: Discretionary Bonus, Goal Sharing, Non-Monetary, Other, Profit Sharing, Stock ISO, Stock NQ, Stock NSAR, Stock RSA, and Stock ISAR.