How You Allocate Draw and Recovery Amounts Using Incentive Payment Plan Categories

This example shows how to use payment plan categories to allocate payment adjustments from a participant's payment plan among plan components. Create and manage payment plans in the Participant Assignments work area.

Tip: If you select Standard for all of your categories, then the payment processing allocates incentive payment plan draw and recovery amounts equally across plan components.

Scenario

You have a compensation plan for US account executives, which includes commission and bonus components. New hires receive an incentive draw for the first six months of employment. You don't want to include any bonus when giving or recovering a draw against earnings.

Plan Component and Payment Plan Information

The incentive compensation plan contains license, service, and bonus plan components while payment recovery is for all earnings over the specified minimum amount of 4,000 USD.

To exclude bonus earnings when giving or recovering a draw against earnings, do these actions:

Select one payment plan category on the Payment Information page or tab of the bonus plan component.
Assign a different payment plan category to the payment plan and other compensation plan components, such as license and service.

This table shows the payment plan category and plan component type for three plan components.

Plan Component	Plan Component Type	Payment Plan Category
PC-1	License Commission	Commission
PC-2	Service Commission	Commission
PC-3	Bonus	Bonus

Configure the new hire commission draw payment plan as shown in this table:

Field	Value
Payment Plan Category	Commission
Flat Minimum Amount to Pay Participant	4,000.00
Minimum Recovery	Yes
Recovery Start Option	Immediate

Paysheet Summary Information

A new hire receives 5,200 USD in January and 4,875 USD in February, even though the minimum payment for the New Hire Commission Draw payment plan is 4,000 USD.

These two tables provide a paysheet summary for the new hire for January and February.

The tables show how payment processing uses the payment plan category and recovery rule to allocate and recover draw amounts.
Recovery starts in February, even though the plan pays a minimum draw through June, excluding any bonuses earned.

Here is the paysheet for January.

Plan Component	Earnings	Draw Adjustment	Paid	Draw Owed
PC-1	1,000	500	1,500	500
PC-2	2,000	500	2,500	500
PC-3	1,200	0	1,200	0

Here is the paysheet for February.

Plan Component	Earnings	Recovery Adjustment	Paid
PC-1	4,000	500	3,500
PC-2	1,000	500	500
PC-3	875	0	875