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Compensation Basis – The Best Piece of Workday Compensation You’ve Never Heard Of

If you’re currently using or thinking about Workday, you’re likely well versed with Compensation and the critical role it plays with both employee staffing and Payroll.  What you may not know is how Workday provides methods to streamline compensation allowing for increased data collection and assignment while reducing the data entry effort.  Whether you’re a prospective Workday customer, or thinking of expanding capabilities within Workday, this article is for you!

When building Compensation, there are three components needed at a minimum:

  • Compensation Package(s)
  • Compensation Eligibility Rules
  • Compensation Plans

There is also a fourth component though which is rarely included.  Though not a secret, it is often bypassed to help simplify Compensation for new customers. The component expands on existing functionality and provides increased flexibility while reducing potential for input errors.  We’re referring to Compensation Basis.

What is a Compensation Basis?

A compensation basis groups together different components to define estimate earnings for different populations. For example, below are two compensation bases:

  • On Target Earnings US – Include salary plans, housing allowance, commission plans, and bonus plans
  • On Target Earnings UK – Includes salary plans, period salary plans, and bonus plans

Using the above compensation bases, we can convey the text into an example using two sample employees with the following estimated earnings:

On Target Earnings US

 

On Target Earnings UK

 

US Employee

 

UK Employee

 
 

$50,000.00

Salary Plan

£60,000.00

 
 

5,000

Housing Allowance

1,000*

 
 

3,000*

Tech Allowance

   
 

10,000

Commission Plan

   
   

Period Salary Plan

5,000

 
 

2,000

Bonus Plan

10,000

 
         
 

$67,000.00

Estimated Earnings

£75,000.00

 

*Notice:

  • US employee does not have a technology allowance included in their estimated earnings
  • UK employee does not have any allowances included in their estimated earnings

 

How is this useful?

While this is great, what are we able to accomplish with the information?

From a local requirement perspective, the advantages of tailoring an estimated earnings report to a specific group of employees are apparent. It allows for different countries to operate within one compensation system and have a more personal experience where concessions are not made due to system limitations.

For Workday customers not using Total Compensation statements, the rigidity of what system users see when viewing standard reports can be misleading. Incorporating bases into reports allow for accurate reporting without the needs for calculated fields and future maintenance as requirements change.  Not only will the employee’s compensation reflect the correct values, but this translates seamlessly to reports and analytics.

Compensation basis also allows a single monetary assignment to an employee resulting in Workday automatically increasing assignment plans based on configuration. For example, if we take the above example and increase a US employee’s compensation based on ‘On Target Earnings US’ compensation basis, we could increase their earnings from $67,000 -> $80,000. With backend rules (such as limiting salary), the following actions would take place from a simple number change:

  • Increase the employee’s base pay until it hits 72.5% of their total. This base pay limit is configured within the Compensation Basis.
  • Put the remaining money into the following plans until the target percentage is achieved: Housing Allowance (7.5%), Commission Plan (15.0%).
  • Place the remaining money from base pay and allowance assignments into an employee bonus.

It would look similar to below:

On Target Earnings US

 

On Target Earnings US

 

Current

 

Proposed

 
 

$50,000.00

Salary Plan

$58,000.00

 
 

5000

Housing Allowance

6000

 
 

3000

Tech Allowance

3000

 
 

10000

Commission Plan

12000

 
   

Period Salary Plan

   
 

2000

Bonus Plan

4000

 
         
 

$67,000.00

Estimated Earnings

$80,000.00

 

Effectively, we’re updating one value (compensation basis) and Workday is performing all the assignment calculations on backend rules. This will reduce errors from employee input and save time. This can also be incorporated into other compensation plans we’ve not mentioned including merit and future payment plans.

Wrapping it Up

Using Compensation Basis, compensation can be enhanced to provide automation, reduce errors, and increase reporting capabilities and give your compensation administrators the peace of mind they need.

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