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The Definition of Variable Pay

Variable Pay is a type of employee compensation that varies, as opposed to salary, which is paid in equal proportions throughout the year. It's often used as part of an overall compensation strategy to recognize and reward an individual, team or group based on achievements/contributions.

Variable Pay facilitates the administration of complex bonus calculations that include quantitative business performance and employee performance measures. At an elevated level, it's a solution that provides a streamlined bonus planning and payout process.

Features of SuccessFactors Variable Pay

  • Manages employees with bonus target amounts
  • Calculate bonus payout on weighted business, individual and/or team goals
  • Integrated employee performance into bonus calculation either as additive or multiplicative component
  • Assigns bonus plan based on one or more employee history fields
  • Prorates bonus target amount for employees who are on a plan for a portion of the plan period
  • Employees can be assigned to more than one bonus plan

Key Differences Between SuccessFactors Compensation and Variable Pay

Variable Pay Chart
Advantages

  • Can manage several bonus plans with weighted business goals in a single program
  • Employees can be assigned to more than one bonus plan
  • Compares business goal results to target and calculates payouts using interpolation or step scale
  • In addition to individual performance, Variable Pay can use a team’s Performance Management form ratings/achievement and guidelines to calculate final payout
  • Can apply bonus caps to limit the bonus plan payout

Things To Be Aware Of

The solution requires additional data to be uploaded (in the event that Employee Central is not used) to enable the calculation. The following five data files are used – in addition to the user master file:

  • Employee History File
  • Bonus Plans File
  • Bonus Eligibility Rules File
  • Business Goals File
  • Business Goals Weights File

One perceived drawback is the complexity and the extra effort required for implementation. You may need to allow extra time in administering the data collection and preparation of import files.

Conclusion

Whether you've implemented Compensation or are evaluating it, Variable Pay is typically included as part of the Compensation Management solution. Keep that in mind as you evaluate your business processes and implementation strategy. If you're looking to revamp your compensation strategy, it might be time to add Variable Pay into the mix. Contact us today to get started!

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Preeti Halapnavar

By Preeti Halapnavar

Preeti Halapnavar is a certified SAP SuccessFactors consultant at AltaFlux Corporation, specializing in Learning, Compensation & Variable Pay, Employee Central and Onboarding. With over 9 years of consulting experience, she is passionate about educating on best business practices, solving customer challenges and providing exemplary support. Preeti’s SAP SuccessFactors experience includes global implementations, upgrades and continued support of the full suite.