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Compensation roles can include the Compensation Line Manager, the Compensation Specialist

or a Human Resource Administrative Clerk


A line manager may work in any area of the company. Typical tasks for the line manager
would include budgeting, compensation administration, reporting and evaluating
compensation related data.
The compensation specialist develops and directs the implementation of compensation
programs, such as salary and bonus programs as well as long-term incentives. The
compensation specialist has his/her own user menu that contains the tasks that he/she
typically performs.

The Administrative Clerk performs all types of administrative tasks and data entry. The
compensation data typically covered in their user role would include maintaining personnel
records, maintaining compensation data, performing pay scale changes and running
compensation related reports.


Compensation Management uses information from different Human Resources components.
Budgeting and compensation administration is performed for organizational units as well as

for employees.
Compensation

Management reads the employee's salary data from the Personnel


Administration component. This data is changed as a result of compensation administration.
The Compensation Management component can update the Basic Pay (0008) and the
Additional Payments (0015) infotypes.
The changes made to an employees pay data are available in the Payroll component.
Compensation Management can also use information stored in the Appraisal System
(Personnel Development) so that you can award performance-based compensation
adjustments.
Workflow can be used to support the approval and activation process for compensation
adjustments.


The

Compensation Management component controls and administers your organization's


compensation policies. This component provides a centralized view of the compensation
policies as well as a control mechanism to administer these policies. You can also use it to
perform compensation planning and budgeting and to perform decentralized compensation
administration.
Compensation Management is made up of different areas
Within Compensation Management, you can perform job pricing. Here you can store results
from external job evaluation systems and market surveys. You can use these results to generate
salary structures that you can then assign to the jobs and positions in your organization. You
can also use these results to determine the internal worth of your jobs and positions and to see
whether your salaries are competitive.
You can assign evaluation points to your jobs and positions and use this data for reporting
purposes.
Budgeting is used to plan and control how much is spent for compensation adjustments.
Budgets are assigned to organizational units. You can create budgets both centrally and
decentrally. You can roll up your budgets over the organizational units.
Compensation Administration is used to distribute salary increases, shares, etc. to individual
employees according to guidelines that reflect a companys compensation policy.

Job Evaluation Results

Definition
Job Evaluation Results Infotype (1050)
This infotype stores the results of the job evaluation for the jobs/positions in your organization.

Link to a job or a position


You

can link job evaluation details to a job or a position.

Subtypes for multiple evaluation systems


You can use Subtypes to differentiate among job evaluation programs such as a Hay Evaluation
program and an In-house program.

Points determine relative worth of each job/position


You can specify the relative worth of a job/position using points

Benchmark job indicator


You
You
You

can allocate the job/position to a specific grade.


can specify that the job/position is a benchmark job.
can link your salary structures to your jobs/positions using the Planned Compensation
infotype (1005). The details for Basic Pay will default from this infotype when you assign an
employee to a job or a position.

Use
Use the job evaluation results to determine the relative worth of each job and position in your
organization. You can also use this infotype to indicate whether the job is a benchmark job

Structure
This infotype is divided into subtypes. Use the subtypes to represent different job evaluation
systems. This allows you to store different sets of job evaluation results.
Subtype EV01 = Hay System

Subtype EV02 = In-house job evaluation system


Subtype EV03 = John Smith consultants

Salary Survey Results

Definition
Salary Survey Results (infotype 1051)
This infotype stores the results of the surveys. This includes information such as the average
base salary and average bonus. Salary surveys allow you to convert the worth of jobs and
positions in your organization into dollars, pounds, euros, etc.

Link to a job or position


You can link salary survey results to jobs or positions

Identifies external market values


Use Subtypes to store the results of multiple salary surveys, such as a Local salary survey and a
National salary survey.

Subtypes for multiple salary surveys


You can store the average base salary and the average basic bonus for every job within a salary
survey.

Use
Use surveys to compare salaries in your organization to salaries paid for similar jobs in similar
organizations.

Structure
This infotype is divided into subtypes. Use the subtypes to represent different types of salary
surveys. This allows you to store different sets of survey results.

Subtype SV01 = Survey comparing your organization with organizations in the same
or related business
Subtype SV02 = Survey comparing your organization with organizations in the same
geographical area
Subtype SV03 = Survey comparing your organization with organizations of a similar
Size

The Job Pricing Process


Purpose
Job pricing provides the basis for generating salary structures from internal and external
information about the jobs and job functions within an organization.
This process allows you to create compensation-related infotype records at the job and position
level. Job pricing currently uses the following infotypes:
Job Evaluation Results Infotype (1050) [Page 24]
Salary Survey Results Infotype (1051) [Page 25]
Planned Compensation Infotype (1005) [Page 22]

Prerequisites
Before you can store job evaluation results and salary survey data at the job level, you must
have:
_ Jobs in the SAP R/3 System
_ Salary surveys and job evaluation results

Process Flow
1. Select the jobs you want to edit.
2. Store the compensation-related at the job level, that is, create infotype records for the jobs
and positions using the infotypes provided.
3. Determine the internal worth of the jobs and positions in your organization based on internal
and external data available.
4. Associate the jobs and positions to pay grades.
5. Generate your salary structures based on this data.

Job Pricing
Prerequisites
To perform job pricing, the following must exist in the SAP R/3 System:
_ Jobs and positions
_ Organizational units, if you want to perform job pricing over the organizational unit

Procedure
1. From the Compensation Management screen, choose Administration _ Job pricing
The Compensation Management - Job Pricing screen appears
2. Decide whether you want to perform job pricing for all your jobs at once or per
organizational unit.
3. Enter data as required and choose
The system displays a list of jobs together with the following information per job:
_ Job name
_ Number of positions associated with the job
_ Evaluation group
_ Benchmark job indicator
_ Evaluation points
_ Job code
_ Average basic salary
4. To create and change the job pricing data, select the relevant jobs and choose
The Compensation Management - Job Pricing dialog box appears. Each tab in the tab

strip represents an infotype record.


5. Enter data as required in each tab and scroll through the jobs selected by choosing or
6. To create an infotype record for a particular job, choose and enter the relevant data
7. To change data contained in an infotype record for a particular job, choose
8. Once you are happy with the data, choose to exit the dialog box.

Result
You have now successfully completed job pricing and have entered all the necessary
compensation-related data for each job. You can now use this data to generate your salary

Figure 4.1 Job pricing process (SAP)


We will describe each job pricing step in details. Compensation Specialist use Portal screens since it
provides comprehensive functionality. It allows you to setup the Provider data, than import their data into
the system, followed by matching the jobs in the system to the jobs of the provider, then aging the data to
ensure relevancy, combining results from multiple vendors and create a composite result, then make salary
structure changes if required.

Figure 4.2 Job pricing launcher


4.1.1
Job analysis
Jobs are created in the system based on the requirements of the company. Also the job descriptions are
created to define the job. This is an important task but there is a lot of debate on the how to define the job.
One school of thought is to define it to the detailed level that exactly lays down the duties and
responsibilities of the job. Another school of thought is to define the job broadly. The reason is that we are
in a dynamic environment and jobs should be broad enough to be adaptable to this evolving environment.
We will leave this for the HR professionals to figure out. ECM provides the ability to capture it either way.
4.1.2
Select Survey provider
There are a lot of survey providers. There are survey providers that cater to specific industry or specific
location or specific jobs etc There are also larger providers that provide all kinds of survey. There is a
cost associated for buying these surveys and hence its important to figure out which ones do you want to

buy. There are also special incentives that the survey provider gives if your company participates in the
survey itself.
ECM allows us to create and maintain as many survey providers as we want by selecting the Provider
Data link.

Figure 4.3 Create and maintain salary survey providers


The provider data screen displays data as you start clicking on the provider. It builds information based on
the selections.

Figure 4.4 More information on the Provider data screen


4.1.3
Receive Survey data
Survey provider provides you with the survey data. The data can include a lot of information including the
date of the survey (normally the year of the survey), the jobs surveyed, and the aggregate pay information
from the companies that participated in the survey at 10 percentile, 25 percentile, 50 percentile, 60
percentile, 75 percentile and 90 percentile.
Once we receive the data, we would need to decide which one is still relevant for us to upload into the
system. We should validate the data at a high level to ensure that we are loading only what we need.
4.1.4
Import survey data
It requires some basic training to navigate the ECM Portal screens. There is a particular way in which the
portal works and need to be understood. Its very important to remember that till you dont make the
selections, you will not see the subsequent screens. The portal screen builds up dynamically as you make
your selections.

Once we click on Import Data, we must select our Survey provider from our list. We can search all the
survey providers by entering * in the Search for field and hit Go. All the available survey providers will
be displayed and we can click on the one we want.

Figure 4.5 Import survey data selection screen.


Once you click on the left most columns that have the box, the next view adds into the frame. On selecting
one of the providers, we will get another screen that will guide us through the subsequent steps.

Figure 4.6 Import salary data upload options


Each provider provides their own proprietary formats to upload the file. There are a couple of parameters to
upload the file. We need 3 types of data files to import to complete the process. Before we can start
uploading the survey information, we need to setup the Survey catalog and the survey job description.

The survey job catalog allows loading all the jobs related to the survey provider.
The Survey description allows loading all the job descriptions from the survey provider.
The survey market data allows loading all the market survey information from the survey provider.
Each of the file loading activity follows a process
Upload the file
Map the fields from the vendor to SAP
Import the data
4.1.5
Job Matching
Each survey has their job titles. They have to be deliberately matched to the job titles in the company. Same
titles dont guarantee that the jobs are the same. There has to be a due diligence that needs to be done
before the mapping exercise is completed and approved. After the data import is complete, the jobs from
company are matched to the jobs from the survey.

Figure 4.7 Job Matching


If you try to match the same job to multiple survey jobs, you could get the following error

Figure 4.8 Job matching error


In certain cases you might get a short dump when you try to un-match jobs. There is an SAP note Note
921064 that can help resolve the issue.
4.1.6
Import Job Market Data
Once the jobs have been matched, then next step is to import the job market data. This step ensures that the
data is correctly aligned to the actual jobs.
In certain cases, survey data upload doesnt store the 60th percentile. There is an SAP note Note 886465
that can help resolve the issue.

Figure 4.9 Import Survey market data

Figure 4.10 Field assignments/ mapping


The final step is import the data.

Eligibility
.
Path
Easy Access
Menu

Description

IMG > Personnel Management > Enterprise Compensation


Management > Compensation Administration > Eligibility

Define Eligibility Rules Variants


Define Eligibility Groupings
Define Eligibility Grouping Feature
Define Appraisal Rules
Define Eligibility Rules

Define Eligibility Rule Variants


You are creating the rules variants to be used later
in establishment with eligibility grouping to define
the rules attribute to determine eligibility.
Example: Annual Merit Increase, Bonus Eligibility,
etc.

Define Eligibility Grouping

You are creating grouping names to be used in a


decision tree later. Usually grouping will be a type
of employee group or category. Salaried,
Executive, Hourly, etc.
Example: For our example, we will use Salaried
Employees (SALR)

Define Eligibility Grouping Feature

Using the grouping define earlier, you will now link them through a decision tree.
Example: The employee record has to be in Compensation Area US, with
employee group 1 Regular in their organizational assignment (infotype 0001),
to be pass in the eligibility grouping called SALR Salaried Employees.
You could base your decision tree upon various decision factors. Such as
Personnel Area, Personnel Sub-Area, Employee Group, Employee Sub Group,
MOLGA, Pay Type, Pay Area, etc. To keep it simple, most will use the first 5
from the

Define Eligibility Rules

This first screen of eligibility rules, we are linking


one or more groupings into the variant bucket.
We will be able to define individual rules
pertaining to each of the grouping.
Earlier you specified the employees has to be in
Compensation Area US and Employee Group 1
Salaried to be part of the SALR Salaried
Employees grouping. Now you are specifying all
those SALR grouping belongs to this particular
variants.

Define Eligibility Rules (Contd)

Minimum Service Criteria


How long the employee needs to be hired into the system prior to be
eligible
Salary Criteria
What Compa-Ratio ranges or % ranges of their salary against a salary
structure they need to be in to be eligible.
Other Eligibility Criteria
How many hours worked they have done to be eligible
Waiting Period
Base upon date off their infotype 0041, how many days, months, or
years they need to wait prior to be eligible.

When you create a compensation adjustment such as a merit increase, you can then specify who
qualifies to participate in the adjustment. If everyone in your company qualifies for the
adjustment you do not need to set up any qualifying rules.
If

the compensation adjustment specifies qualifying criteria such as 3 months service you need
to set up a rule.
Qualifying criteria includes data such as hire date or length of service, number of hours
worked and ranges for pay scale, pay grade, job, salary and performance details.
For individual employees for whom you make an exception concerning qualifying criteria, you
can use the Compensation: employee eligibility infotype (0381). For example you may
overlook the 3 months length of service for some new employees.
You can use eligibility groups if you have differing criteria for some groups of employees. For
example to qualify for a bonus let us suppose that everyone must have 12 months service, with
the exception of Executive employees who only need to have 6 months service. In this case
you set up 2 rules, one for the group Executive and one for the rest of the company.
When you define a group you use a feature to link the group to your employees. You can use
the organizational assignment details such as employee subgroup.
You can also employ user-defined criteria with a user exit.

Guidelines
Definition
Guidelines determine how compensation adjustments are calculated. Guidelines are values of a
range for compensation. Ranges can be a percentage, an amount, or a unit.

Use
Compensation adjustments are decided by the manager. Compensation Management allows you
to set guidelines for compensation calculations, or set limits for the managers recommendations.

Structure
SAP R/3 System contains three types of guidelines:
_ fixed
_ Matrix
_ User-defined

Fixed Guidelines
Compensation adjustments are calculated using a fixed percentage, fixed amount, or a fixed
number.

Matrix
Compensation adjustments are calculated using matrices, or one or more criteria. Matrix

guidelines are one dimensional, two dimensional, or three dimensional.

Path
Easy Access
Menu

Description

IMG > Personnel Management > Enterprise Compensation


Management > Compensation Administration > Guidelines

Define Guidelines Variants

Similar to define eligibility variant, you


are creating a bucket in which you will
later associate one or more grouping to.

Define Guidelines Grouping

Similar to define eligibility grouping, you are


defining groups of employees to
differentiating guidelines

Define Guidelines Grouping Feature

Similar to define eligibility grouping feature, you are defining the decision
tree to associate the grouping for guidelines

Define Guidelines Proration Rules

When guidelines are applied to an individual, the proration rules will prevent
them from being able to receive full amount.
Example: The guideline suggest 5% increase. One employee was hired into
the company, but only worked 6 months. The system will prorate and suggest
only 2.5%

Matrix Guidelines

Multidimensional guidelines allow the calculation of salary adjustments based on different


criteria (maximum 3 criteria).
Criteria delivered with the standard R/3 release:

- Length of service
- Position in the salary grade
- Performance appraisal results
- Age
User-defined methods are allowed.
Error control and monitoring are flexible
Calculation of individual salary adjustments are based on multiple criteria
Example:
1.An employee who is with the company for less than 6 months and who has a performance
result of more than 80 points will get a merit increase of 3%.
2.An employee who is with the company for more than 6 but less than 12 months and has also
a performance result of more than 80 points will get a merit increase of 4%.

Define Methods For Matrix Dimensions

You are defining what dimension(s) you will use to


base the guidelines upon (i.e., Age, Appraisal
Rating, Compa-Ratio, Length of Services,
Percentage Range, or MBO Appraisal)
Note: If the dimension involve Appraisal, there
are two version of appraisals you could use to

configure. The basic version uses infotype 0025. The configuration for it is
located at
IMG > Personnel Management > Personnel Administration > Payroll Data >
Appraisals

Setting up a matrix guideline requires the following steps:


Specify administrative matrix data: compensation area, name, validity period
Assign matrix dimensions
Specify the possible entry values (single values or ranges)
Specify the calculation variant
Define dimension segments
Maintain matrix values

Define Matrix Dimensions

At each of the Method of Dimensions youve identified earlier, you will link those
to the matrix dimension you are creating here. Usually, you will use the same
description between the two.

In order to establish a matrix guideline, segments have to be defined for each dimension.

Define Matrix Dimensions Segments

Using each of the matrix dimensions youve created, you are now defining the
values for that dimension.
For example, If the person performance appraisal was a C, from a system
perspective, he falls between 2.002 and 3.001 value.
Note: Segment field is a four characters alphanumeric field

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