1. Using Incentive Compensation
  2. Calculate Monthly Bonuses Using True Up

Calculate Monthly Bonuses Using True Up

This example demonstrates how to create an annual incentive plan that provides participants with monthly, or period, bonuses as they meet their year-to-date (YTD) attainment. It subtracts, or trues up, any previously paid amount from the current calculated earnings.

Here are key decisions for the plan component in this scenario.

Decision to Consider

In This Example

What is the payout frequency?

Monthly

Earnings are trued-up over the plan year.

What is the calculation type?

Interval-based

How many measures do you require and what are their weights?

One measure with no weight

How many rate tables do you require, and how many dimensions for each table?

One rate and one dimension

How do you want to apply the rate?

Nonproportional, or step rate

These key decisions are for the performance measure in this scenario.

Decision to Consider

In This Example

How should calculations process the transaction?

Group by interval

What is the unit of measure?

Amount

What is the performance interval?

Year

Does the calculation involve revenue?

Yes

Does the calculation involve a scorecard?

No

Summary of the Tasks

In the Compensation Plans work area, create a plan by creating the pieces first, and then associating them with the plan.

  1. Create the attainment expression.

  2. Create the performance measure and associate the attainment expression with the measure formula.

  3. Create the rate dimension input and earnings expressions.

  4. Create the payout percentage rate table.

  5. Create the plan component and associate the earnings expressions with the incentive formula. Also associate the rate table and the rate dimension input expression.

  6. Create the incentive compensation plan and associate the plan component.

Use default values for fields unless the steps specify other values.

Create the Attainment Expression

Create an expression to calculate the YTD revenue attainment. Later, you associate this expression with the performance measure formula.

  1. Click Create in Manage Expressions in the Compensation Plans work area.

  2. Name the expression YTD Credit Amount

  4. In the Configure Expression section, create the expression SUM(Credit.Credit Amount).

    1. On the Attributes menu, select Functions - Aggregate Functions - SUM.

    2. Click the left parenthesis (.

    3. On the Attributes menu, select Credit > Credit Amount.

    4. Click the right parenthesis ).

  5. Click Save and Close to return to the Manage Expressions page.

  6. Click Done.

Create the YTD Revenue Attainment Performance Measure

Create the performance measure that calculates YTD revenue attainment, using the attainment expression that you just created.

  1. Click Create in Manage Performance Measures.

  2. Name it YTD Revenue.

  3. In the Performance Interval field, select Annual.

  4. Set start and end dates for the year.

  5. Click Next to open the Define Goal page.

    1. In the Target field, enter the amount, for example, 120,000.

    2. Distribute the target evenly.

  6. Click Next to open the Add Credit Categories page.

    1. Add the credit categories.

      If a credit category doesn't exist, then click Create to create it and add it to the measure.

  7. Click Next to open the Define Measure Formula page.

    1. In the Process Transactions field, select Grouped by interval.

    2. In the Expression Name field, search for and select the expression that calculates the YTD revenue attainment, YTD Credit Amount.

  8. Click Save and Close to return to the Manage Performance Measures page.

  9. Click Done.

Create the Rate Dimension Input and Earnings Expressions

Create these two expressions that calculate the bonus payment. Later, you associate these expressions with the plan component.

Expression

Purpose

Rate dimension input

Used by the rate table to determine the revenue attainment percentage

Earnings

Used to calculate the YTD trued-up bonus

  1. Click Create in Manage Expressions.

  2. In the Configure Expression section, create first the rate dimension input expression Measure.ITD Output Achieved and then the earnings expression Measure result.YTD Revenue..ITD Output Achieved * Rate Table Rate.

    Rate Dimension Input

    1. Name the expression ITD Output Achieved.

    2. On the User Defined Objects menu, select Measure result.

    3. Search for and select the measure that calculates revenue attainment, YTD Revenue.

    4. Select ITD Output Achieved.

    5. Click Add to Expression.

    6. Click Save and Create Another to create the earnings expression.

    Earnings

    1. Name the second expression YTD True Up Bonus.

    2. On the User Defined Objects menu, select Measure result.

    3. Search for and select the measure that calculates revenue attainment, YTD Revenue.

    4. Select ITD Output Achieved.

    5. Click Add to Expression.

    6. Click the asterisk *.

    7. On the Attributes menu, select Rate Table Rate.

    8. Click Save and Close to return to the Manage Expressions page.

    9. Click Done.

Create the Payout Percentage Rate Table

Create a one-dimensional rate table that the plan component uses to determine the earnings or payout rate.

  1. Click Create in Manage Rate Tables.

  2. Name it Earnings Rate.

  3. In the Type field, select Percent.

  4. On the Rate Dimensions section toolbar, click Actions > Create.

    1. Name the dimension Earnings.

    2. In the Tiers section, add the From and To values for each tier such as 0 -- 25,000, 25,000 -- 50,000, 50, 000 -- 100,000, and 100,000 -- 9,999,999. Make the final To value much larger than you would ever conceivably use, for example, 9,999,999.

    3. Click Save and Close to return to the Create Rate Table page.

  5. Click Edit Rates.

    1. Edit the percentage rate for each tier, such as 2.5, 5, 7.5 and 10.

    2. Click Save and Close to return to the Create Rate Table page.

  6. Click Save and Close to return to the Manage Rate Tables page.

  7. Click Done.

Create the YTD True-Up Bonus Plan Component

Create the plan component that calculates YTD trued-up bonuses using the bonus input and output expressions that you created, as well as the rate table.

  1. Click Create in Manage Plan Components.

  2. Name it YTD True Up Bonus.

  3. In the Calculate Incentive field, select Per interval.

  4. In the Incentive Type field, select Bonus.

  5. Enter start and end dates for the year.

  6. Click Next to open the Add Performance Measure page.

    1. Add the measure that calculates the revenue attainment, YTD Revenue.

  7. Click Next to open the Define Incentive Formula page.

    1. In the Expression Name field, search for and select the earnings expression that calculates the YTD Trued-up bonus, YTD True Up Bonus.

    2. Select the True up check box to have the calculation process automatically subtract previous earnings from current calculated earnings.

    3. In the Reset Interval field, select Annual.

  8. Click Next to open the Add Rate Table page.

    1. On the Rate Table section toolbar, click Add.

    2. In the Name field, search for and select the rate table that determines the payout percentage, Earnings Rate.

    3. In the Rate Dimensional Inputs section Expression Name field, search for and select the expression that provides the measure ITD output achieved, ITD Output Achieved.

  9. Click Save and Close to return to the Manage Plan Components page.

  10. Click Done.

Create the Monthly Trued-Up Bonus Incentive Compensation Plan

Create an incentive compensation plan that provides bonuses based on trued-up YTD revenue attainment.

  1. Click Create in Manage Compensation Plans.

  2. Name the plan Monthly Trued Up Bonus.

  3. Enter start and end dates for the year.

    Tip: Always end date your compensation plans.

  4. Click Next to open the Add Plan Component page.

  5. Add the plan component that calculates YTD trued-up bonuses, YTD True Up Bonus.

  6. Click Save and Close to return to the Manage Compensation Plans page.