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A Short Study of SAP Enterprise Compensation Management

As a Senior Education Consultant in the North America SAP Education group, I am frequently surprised when, teaching our Human Capital Management courses, how many participants tell me that their Enterprise has a very informal compensation process.  They say that they work with managers who are very generous, and other managers who are very stingy with their compensation budgets.


To make the process more meaningful and equitable, there is another option.  SAP Enterprise Compensation Management allows you to configure eligibility rules and guidelines for each Compensation Review.  Both can be overridden if you permit them to be, through a combination of configuration and authorizations.   Eligibility for a compensation adjustment can be based on appraisal rule, which can permit only employees with certain values in their performance management document to be eligible or ineligible.  You can also use single or multiple other criteria, such as minimum service criteria, minimum and / or maximum percent in range, minimum and / or maximum compa-ratio, and other eligibility criteria such as minimum work hours per period, and a waiting period.


Guidelines can be set up in amounts, percents, or units (such as shares of stock), and can have minimums or maximums.  In addition, you have the ability to create a matrix guideline, including up to 3 criteria, which are called dimensions.  Your standard dimension choices are Age, Appraisal, Compa-Ratio, MBO Appraisal, Percent in Range, and Length of Service. 


For example, let’s say you have created a 3 dimensional matrix for salary increases using the dimensions MBO Appraisals, Length of Service, and Compa-Ratio.  The MBO Appraisals dimension has 4 segments of Outstanding, Good, Average, and Poor.  The Length of Service dimension has the 4 segments of 0-2 years, 2-5 years, 5-10 years, and greater than 10 years.  The Compa-Ratio dimension has the 3 segments of below midpoint, equal to midpoint, and above midpoint.


For each combination of dimension segments you have defined, you need to enter a value.  In this example, that would be 48 default values.  Depending upon whether you decided to provide a range as a default, you also need to define the minimum and maximum values in addition to the default value.  In this case, message types such as warnings or errors can be configured if the manager plans to go under the minimum or over the maximum.


When the manager performs Compensation Planning in Manager Self Service, there are wonderful embedded graphics to visualize the results of the planning relative to other employees, and relative to other indicators such as minimum, maximum, and compa-ratio of the Pay Grade Group / Level.  During the compensation planning process, the value entered by the manager in MSS is checked against the upper and lower guideline limits, while eligibility is checked against the eligibility rules.


Additional information on this topic is available on our Education website at where you can find our HR540 – Enterprise Compensation Management course and view an outline of the course content as well as the different delivery methods and dates.  If you prefer to speak with the North America Customer Interaction Center about the course, you can call 1-888-777-1727 or email at

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