Incentive Compensation Plans, Plan Components, and Performance Measures

Plans contain plan components. Plan components contain performance measures, incentive formulas, and rate tables that together determine how to calculate incentive compensation, when to calculate it, and what attainment to use.

These objects form incentive compensation plans and calculate the attainment and earnings. Plan components, performance measures, expressions, and rate tables are modular and reusable.

Create and manage plans, plan components, and performance measures in the Compensation Plans work area.

Plan Components

Plan components indicate variations of incentive, such as bonus or commission. From a small library of plan components, you can configure many incentive compensation plans, simplifying plan setup and administration. A component assignment is a many-to-many relationship:

• Assign multiple plan components to a single plan.

• Assign a single plan component to multiple plans.

Performance Measures

Use performance measures to track participant attainment and progress toward a defined organizational goal. An assignment is a many-to-many relationship:

• Assign multiple performance measures to a single plan component.

• Assign a single performance measure to multiple plan components.

A plan component includes:

• The performance measures used in the incentive formula expressions

• Any dependent measures used by other measures associated with the plan component

Incentive Formula

The formula part of a plan component specifies how to calculate incentives and contains an expression that computes the earnings during the calculation process. The expression usually includes the calculated results of one or more performance measures. The incentive formula can include a rate table result.

Rate Table

The plan component rate table or performance measure scorecard determines the compensation rate for the attainment and earnings calculations.

Payment Information

Use payment information to allocate payment adjustments from participant payment plans among plan components. You can also designate a third-party payee.

Expressions

Use these interchangeable, reusable groupings of numeric operators and SQL functions as incentive formulas and measure formulas, as well as in expression-based rate dimensions. Expressions can include:

• Plan component attributes, such as target incentive or measure weights

• Incentive compensation transaction or credit attributes, such as credit amount or margin

• Calculated values of plan component earnings or measure attainment