Examples of Calculating Earnings Using Step Rates
These examples show how to calculate incentive earnings calculations using a step rate, or nonproportional split, across rate tiers. Create and manage expressions and rate tables in the Compensation Plans work area. This table shows the percentage rates for the tiers.
|
Tier |
Rate (Percent) |
Calculation to Derive Rate Table Rate |
|---|---|---|
|
0 -- 1,000 |
1 |
(Amount * Tier 1 Rate) |
|
1,000 -- 3,000 |
2 |
((Amount in Tier 1 * Tier 1 Rate) + (Amount in Tier 2 * Tier 2 Rate)) |
|
3,000 -- 8,000 |
3 |
((Amount in Tier 1 * Tier 1 Rate) + (Amount in Tier 2 * Tier 2 Rate) + (Amount in Tier 3 * Tier 3 Rate)) |
|
8,000 -- 20,000 |
5 |
((Amount in Tier 1 * Tier 1 Rate) + (Amount in Tier 2 * Tier 2 Rate) + (Amount in Tier 3 x Tier 3 Rate) + (Amount in Tier 4 * Tier 4 Rate)) |
The third column isn't part of the actual rate table. It's included here to show you the calculation that the application uses to derive the resulting rate table rate for each tier.
Transactions Processed Individually and Split Nonproportionally Across Rate Tiers
In this scenario, the calculation process does these actions:
-
Processes all incentive compensation transactions individually against the rate table
-
Can split each transaction amount nonproportionally across rate tiers
The total amount of compensation earned for the quarter is 164 USD.
Here are transactions and the corresponding commission amount calculations using the percentage rate table.
|
Transaction |
Date |
Amount (USD) |
Commission Rate (Percent) |
Commission Calculation |
Commission Amount |
Description of Amount |
|---|---|---|---|---|---|---|
|
T1 |
01-Jan-2015 |
200 |
1 |
(200 * .01) |
2 |
Uses only tier 1 |
|
T2 |
02-Jan-2015 |
300 |
1 |
(300 * .01) |
3 |
Uses only tier 1 |
|
T3 |
15-Jan-2015 |
1,500 |
1.33 |
((1,000 * .01) + (500 * .02)) |
20 |
Uses all of tier 1 and part of tier 2 |
|
T4 |
01-Feb-2015 |
1,200 |
1.167 |
((1,000 * .01) + (200 * .02)) |
14 |
Uses all of tier 1 and part of tier 2 |
|
T5 |
15-Feb-2015 |
2,000 |
1.5 |
((1,000 * .01) + (1000 * .02)) |
30 |
Uses all of tier 1 and part of tier 2 |
|
T6 |
01-Mar-2015 |
4,500 |
2.11 |
((1,000 * .01) + (2,000 *.02) + (1,500 * .03)) |
95 |
Uses all of tiers 1 and 2 and part of tier 3 |
Calculation at End of Interval, Nonproportional Split, Interval-to-Date
In this scenario, the calculation process does these actions:
-
Processes at the end of the interval, month in this case
-
Creates only a single earning record for each interval because calculation is grouped by interval
-
Splits monthly attainment across rate table tiers
Here are monthly intervals and the corresponding compensation earnings calculations using the percentage rate table.
|
Month |
Revenue Attainment (USD) |
Effective Rate (Percent) |
Earning Calculation |
Earnings (USD) |
Description of Earnings |
|---|---|---|---|---|---|
|
January |
2,000 |
1.5 |
((1,000 * .01) + (1,000 * .02)) |
30 |
Uses all of tier 1 and part of tier 2 |
|
February |
3,200 |
1.75 |
((1,000 * .01) + (2,000 *.02) + (200 * .03)) |
56 |
Uses all of tiers 1 and 2 and part of tier 3 |
|
March |
4,500 |
2.11 |
((1,000 * .01) + (2,000 * .02) + (1500 * .03)) |
95 |
Uses all of tiers 1 and 2 and part of tier 3 |