Variable pay forecasting: what is the business need?
A study from Concur, now part of SAP, quotes a CFO saying: “Those who are prepared shouldn’t have to worry about year-end. There shouldn’t be any surprises because they know what it looks like each month.” (Source:Insights on Success: Preparing for 2015 and Beyond) CFOs cannot afford surprises. For many companies, compensation is the biggest expense, and it includes elements that are by definition variable and can thus become a surprise: bonuses, incentives bonuses, goal achievement tied to bonuses, and position specific payments. In fact, 88% of companies today have a variable pay plan (Source: Hewitt Salary Increase Survey 1990-2009). CFOs need to include this component in the company planning cycle and cannot afford to wait until year-end to get the data from HR. Getting accurate information on a quarterly or even monthly basis is a challenge, but HR systems and greater automation and integration can help. With 1502, we want to help HR align itself closer to Finance to better support the business.
What is the solution offered by SuccessFactors Compensation?
We are enhancing SuccessFactors Compensation capabilities by introducing “Variable Pay Forecasting”. This functionality will give HR the ability to provide a forecasted variable pay result for all or part of the organization at any point in time. The end reports can be scheduled, and they can be downloaded at the desired level of granularity (employee, cost center, division) to make it actionable for the reader of the report.
Here is the high level process in the solution:
- To perform the forecasting calculation, the compensation admin will need to set up the variable pay program with all data (bonus calculation, budgets, bonus plan, eligibility…)
- During the planning cycle, the administrator will have new access to the “Forecast Bonus” feature from the settings of the application and will enter the data for the forecasting (date, results, rating source…)
- The admin will upload the annualized forecasted business goal results into the system as part of the business goal results file, and can generate the forecast report without launching the form
- The forecast will provide a comprehensive dashboard in graphical format, with the option of changing it to table format (see fig.1)
Fig 1: Variable Pay Forecasting
What is the benefit of variable pay forecasting?
It will help the compensation admin, as well as the broader business! For compensation admins, this new functionality will bring more automation to the forecasting/calculation process, giving them the opportunity to focus on strategic tasks and decision making instead of running manual and tedious bonus calculation processes. For the broader business, the advantage is obvious: the functionality provides increased budget planning agility via “variable pay”. So make sure your business belongs to those companies that are prepared and do not have to worry about year-end or periodic surprises from the HR department. Start now with variable pay forecasting!
