Bonus Calculation Equations in Variable Pay
In this recording we provide a deep dive on Bonus Calculation Equations in Variable Pay using an employee with the same employee history to see how the calculation differs between multiplicative and additive formula (the latter being leading practice).
We focus on the two most used Equations :
- Multiplicative formula : Base X Business X Individual
- Additive formula : Base X (Business + Individual)
Please note that we should avoid equation number 1 (Base x Business) for the reasons below :
- It does not allow the display of the budget tab.
- In case ABR is on it will lead to an error message when opening worksheets (ABR requires the individual component in the equation even if it is not used in the final payout calculation).
Key takeaways of this recording :
- Variable Pay always works with monetary amounts rolling up to the entry level, percentages are not native to the module (they are the outcome of the division between two monetary fields). Because of that we should always pay attention to number formats of monetary fields especially when using the multiplicative formula (as per the recording example).
- Variable Pay always works from the assignment level to the entry level in a full bottom to top approach.
A quick but important note after reviewing the recording : in the recording I mention that we get the value displayed for each business goal in the Goal Basis column from the Organization section amount. This is actually not true, it’s the other way round. The Organization section amount is actually the sum of all Goal Basis values inside each business section. Which is why in non-ABR configurations the Organization section amounts AND most importantly the entry level column called “Total Prorated Target” (ID = assignmentTargetAmountTotal) may show a value different from what we would expect if the total of all Business Goals weights is different than 100%. Please see this document for additional explanations.
All the best,