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How to do job pricing with ECM

Budgeting is to make sure that we are within the bounds of what an organization can afford.

The objective of this chapter is to help in funding a compensation plan, creating a budget structure, uploading budget values, understanding the underlying configuration options, working on the exception.

Budgeting is an important part of compensation management. Though it’s an optional thing to have a budget for a plan, it will most certainly be used in most cases because of the value it brings. Budgeting helps in managing the overall money that is available for distribution. If a manager goes above the budget, the system itself might not allow it or at least gives the manager an alert that he/she is going over the budget.

There are different ways that the company might arrive at the budget. There is a lot of survey information that the company can avail themselves of. This market information will assist them in defining the target bonus. The target bonus is a bonus that an employee in a particular job might be eligible for if they have performed at par during the year.

Internally the company can review the payments they have made during the years and do some what-if scenario simulation. If they like one of the scenarios they could transfer that information directly as a budgeting amount.

It’s important to remember that the whole budgeting exercise depends on the organizational structure that the company has adopted. There is one organization structure within SAP that is used for multiple functions. The standard setting for this plan version is ‘01” by default. It is used also for workflow, reporting, position management, linking it to employee records etc…

4.1      Using Job Pricing and Market Surveys

Job pricing helps us determine the pay structure of each of job in the company. For example: HR manager is the company is paid $60,000 basic pay and $6,000 bonus but on analyzing the comparable job from the market survey’s the company might find that the market average is $70,000 basic pay and $10,000 bonus. Now the company can decide what it wants to do. Does it want to continue to lag the market with lower pay, does it want to make it at par or does it want to lead the market by substantially increasing the salary and bonus.
This whole process with its more detailed steps is laid out in the process figure below.

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 it’s 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. It’s very important to remember that till you don’t 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 don’t 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 doesn’t 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.

4.1.7       Age data

If you had bought a survey a couple of years back and would like to use it today then you need to age it accordingly. The system allows for aging either by market movement rate or age factor.

Figure 4.11   Aging market data

Once you decide that you want to age by market movement rate, you enter the annual rate that the pay might have increased. If the initial survey is 4 years old and the market movement rate is 2%, then when you hit Age Market data, the salary will be adjusted by about 8%.

If you were to use age factor, it would increase the pay by that flat amount.

4.1.8       Weigh data

The data can be collected from various sources but then they can be weighed so that the final result reflects the calculations accurately. For example, you would have collected the base salary for a Sales employee from a survey with the same job and another one from a little less matching job. You can weigh the survey which had the same job higher than the one that had a less matching one. We can also provide the market movement data rate to make a more current comparison.

Figure 4.12   Weighing Data along with aging parameters

Once you decide the right weight, you can click on the Build composite result,

4.1.9       Compile market data

You can choose the appropriate data that you want to use to create a composite structure. In the case below, we have selected the 2 relevant surveys for our job to create a composite. You can also store this information using the ‘Save As’option.

Figure 4.13   Build composite results

This data gets store on the job infotype 1271.

Figure 4.14   Composite Results infotype

You will see that the 60th percentile row field incorrectly displays 0.00. If you see a similar thing, please review the SAP note 886465. This is related to the problem during the ‘Import Data’ step.

4.1.10       Data Analysis

These allows us to compare the internal job with the composite result of the external survey. The job is evaluated with all the different percentile.

Figure 4.15   Compare internal and external compensation

4.1.11       Determine market gap

In this way, the compensation specialists will determine the market gaps for the jobs they need to make the determination.

4.1.12       Philosophy

The philosophy of the company will drive the route it takes to bridge the gap. If it is lagging behind the market and choses to lag behind, it doesn’t need to take further action. But if it wants to be at par or even lead the market, it will need to make the determination of what the new structure needs to look like.

4.1.13       Identify jobs

After reviewing the data, the company will identify the jobs that need to have the salary structures changed.

4.1.14     Adjust salary structure

It is very important to remember that we have been doing job pricing for the job but when it comes to updating, it the salary structure. The salary structure could be used by multiple jobs. It could happen the inadvertently we might update the salary structure thinking we are updating it based on the job analysis, but effectively it might change it for other jobs that we didn’t intend to.

Figure 4.16   Salary adjustment with current salary structure

The composite market data is available.

Figure 4.17   Composite Market data

Now we have seen the existing structure and market structure. We have to decide on the planned structure. The final tab Planned Salary Structure will display a merged result.

Figure 4.18   Merged planned salary structure

Please note that it’s very important to remember that the selections that you make on the previous screen are considered for the proposal. In the market data on the previous screen, we had selected ‘Managers composite’and hence we get this result. If we select something else, the results will change.

Before save this as the new proposed structure, we can view many graphical representation of our data. We can compare the percentage different between the internal salary structure and planned salary structure. The bars show the difference. Where there are no bars, means that there is no difference from the existing internal pay structure.

Figure 4.19   Graphical representation of internal v/s planned salary structure

If needed, you can make arbitrary changes to the structure. This might be required for the purposes of rounding or aligning with company’s internal guidelines. We can overwrite the salary structure as in the case below where we have changed the planned structure for grade GRD01/ level 00 from 26400/38400/50400 to 27000/38400/51000.

Figure 4.20   Changing the proposed structure

We can save different planned salary structures in the system.

Figure 4.21   Saving the planned salary structure.

4.1.15     Activate salary structure

Once it’s decided that you have a winner, and then the system needs to be updated to reflect the new salary structure.

There is a twist here. All the data is in the production system but salary structure changes are normally done in the development system and transport to production. This is achieved by providing the RFC connectivity.

Once in Development environment, go to Personnel Management • Enterprise Compensation Management • Job Pricing • Pay Grades and Levels • Update Pay Grade Amounts from Market Data. This might need to be done by a configurator rather than the compensation specialist.

Enter all the requisite information and also the RFC destination of the production system from where the Salary Adjustment Version has been retrieved.

Figure 4.22   Update salary structure

Once the new salary structure is retrieved, it can be displayed before a transport is created.

Figure 4.23   Perform salary structure update and create the relevant transport

This ends the compensation specialist process for updating the salary structure. If an employee’s salary needs to be changed, then it will be a part of master data administration separately.

4.1.1.      Receiving data from Market Surveys (is captured above)

4.1.2.      Sending data for Market Surveys

Many companies take part in market surveys. To facilitate submitting the data for the salary survey, ECM provides extraction report. Execute transaction code PECM_QUERY_SURVEY

Figure 4.24   Sending salary survey data

The salary survey data can be extracted for a particular population using the selection criteria.

The compensation job group is very specific to ECM. It allows the selection to be limited by job groups. It is also important to note that the internal jobs should be mapped to the survey jobs before this report can be run.

Figure 4.25   Salary survey participation details.

SAP provides standard output. You might need to work with your vendor to validate if the output will work for them.

The standard pay categories that are delivered are Base pay, bonus and total compensation. In case you want to add other pay categories, you have to begin with the configuration:

Figure 4.26   Additional configuration for pay categories

Let’s add another pay category ‘Training Cost’. To do that, we will add it using ‘Define Additional Pay Categories’

Figure 4.27   Adding Pay category

We also need to define how we are going to calculate this field using ‘Define Pay Category attributes’

Figure 4.28   Training Cost attributes

The standard survey participation reports also needs to be modified if this information needs to be sent to the external vendors that provide relevant survey data.

Note: Compensation  Job groups

Compensation job groups are used to group jobs based on the company’s need. This attribute is one of the newer attributes that is attached to the job using the infotype 5050. The job groups need to be configured first in the IMG for ECM at Job pricing • Define Compensation Job Groups

Figure 4.29   Define Compensation Job Groups

This job groups then need to be assigned to the appropriate jobs. We will use transaction code PP01 • Select a job • create ‘Compensation job groups’ • assign the job group

Figure 4.30   Assign compensation job group to the job

This information can then be used in the salary survey participation data selection criteria.

There is one more aspect that I want to cover here. This is related to Job Evaluation. Internal job evaluations were also very common some time back. Each job was evaluated internally and given points based on its importance. The information can still be captured using the infotype

Figure 4.31   Job evaluation

ECM provides multiple methods to do job evaluation. Different methods might to linked to different vendors.

The results can be points or evaluation group. An Evaluation group is a grouping of jobs that have a similar internal worth.

Figure 4.32   Job Evaluation groups

During an implementation, certain configurations can be realigned to fit the requirements. In the above case, the evaluation methods could be classified as Internal and External and the evaluation groups could be configured as vendors.

4.1.16     Technical information

All the information of the Job Pricing is stored in tables that begin with T71JPR. There are 42 such tables.

Figure 4.33   Job Pricing tables

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      Author's profile photo Former Member
      Former Member

      Awesome document. A practical approcah is mentioned in the project. Please also contribute the same type of content for other sub modules of SAP HCM.