Considerations for Adding Plan Components to Incentive Plans

You can build your plan components incrementally from the bottom up and test frequently as you build. Limit the number of plan components for a plan to reduce the number of earnings records.

When you add plan components to plans in the Compensation Plans work area, you can adjust the association start and end dates. You can also set a calculation sequence and target incentive percentage.

Association Start and End Dates

When you add plan components to compensation plans, the association start and end dates automatically populate with the plan component start and end dates. Change the association dates for special performance incentive funds (SPIFs) or for promotional bonuses, which are valid for a short duration.

For example, you have a promotional bonus that applies only to the third quarter. Modify the plan component association dates accordingly. If you want to provide the same bonus in the second and fourth quarters, then you must duplicate the relevant plan component. Then, associate one plan component for the first date range and the other plan component for the second date range. You can only associate a plan component with a plan once, even if the association dates differ.

Calculation Sequence

When the output of one plan component is used as input for another plan component, then you must sequence them. Set calculation sequences when dependent plan components refer to the calculated results of other, base plan components. The dependent plan components must have a higher calculation sequence than the base plan components. Whenever you associate a dependent plan component with a compensation plan, also associate the base plan component to complete the compensation plan setup.

For example, you have two plan components, Service Bonus and Product Bonus. The calculation process computes the Product Bonus earning at a higher percentage when salespeople attain 100 percent on their service quotas. Because the product bonus depends on the service bonus calculation, set the calculation sequence of the plan components this way:

• Service Bonus: 1

• Product Bonus: 2

Target Incentive Percent

The target incentive percent is the percentage of the plan target incentive amount that applies to the calculated earnings of that plan component. You can include the target percent and target earnings in expressions. If you enter target incentive percents, then the total percentages for all added plan components must equal 100 percent.