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SAP Solution in Detail
          mySAP ERP




ENTERPRISE COMPENSATION
MANAGEMENT WITH mySAP™ ERP
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2
CONTENTS
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Building an Enterprise Compensation Management Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 4

Complete Enterprise Compensation with mySAP ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Compensation Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
– The Compensation Plan Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
– The Back-End Flow of the Compensation Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
– Compensation Planning for Front-End User Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
LTI Interfaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Job Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

At-a-Glance Enterprise Compensation Management Infotypes
and Architecture Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

SAP Employee Self-Service and the Total Compensation Statement . . . . . . . . . . . . . . . . . . 15

Complete Reporting Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

The Advantages of Integrated Enterprise Compensation Management . . . . . . . . . . . . . . . 17




                                                                                                                                                                  3
BUILDING AN ENTERPRISE
                                                               COMPENSATION
EXECUTIVE SUMMARY                                              MANAGEMENT STRATEGY
An enterprise compensation management strategy is crucial      In an expanding economy, human resources are scarce, and
for dealing with a rapidly changing business climate and       it’s important to attract and retain the best people. In a
making the most of human resources in the best – and worst –   recessionary economy, human capital is a major expense that
of economic times. mySAP™ ERP Human Capital Management         needs to be controlled effectively. But no matter what the
(mySAP ERP HCM) provides a complete solution for enterprise    global economic situation may be, you need maximum insight
compensation management, budget handling, compensation         and flexibility to manage enterprise compensation. You also
administration, long-term incentives, job pricing, and         need the ability to adapt dynamically to ever-changing
reporting.                                                     circumstances.

                                                               With a comprehensive compensation management solution,
                                                               you can define a strategic compensation policy that applies
                                                               throughout your enterprise – one that motivates employees to
                                                               support business goals, allows you to respond to change, and
                                                               improves your company’s bottom line. And one that enables
                                                               you to track, monitor, plan, simulate, and execute that strategy
                                                               precisely. A comprehensive compensation management
                                                               solution achieves this by integrating all relevant human
                                                               resources (HR) processes, including the administration of fixed
                                                               and variable pay, long-term incentives (LTIs), performance
                                                               management, compensation budgeting, personnel cost
                                                               planning, salary benchmarking, and payroll.




4
COMPLETE ENTERPRISE COMPENSATION
WITH mySAP™ ERP
With mySAP ERP Human Capital Management (mySAP ERP                                 compensation techniques and achieve their strategic goals.
HCM), you can maximize the value of your employees and align                       The solution can help you build effective employee compen-
employee skills, activities, and incentives with business objectives               sation programs and support your company’s compensation
and strategies. mySAP ERP HCM also provides the tools to man-                      management processes. With numerous integration points,
age, measure, and reward individual and team contributions.                        mySAP ERP HCM is a true end-to-end solution that powers a
                                                                                   fully integrated enterprise compensation management process.
By leveraging integrated HCM tools, you’ll gain insight into –                     mySAP ERP HCM supports the major areas in enterprise
and control over – increasingly virtual workforces. Adapt your                     compensation management: budgeting, compensation admin-
workforce and IT investments quickly and easily. And signifi-                      istration and planning, long-term incentive administration,
cantly improve productivity as employees focus more time on                        and job pricing.
value-added activities.
                                                                                   To implement all SAP enterprise compensation management
mySAP ERP HCM supports processes for recruiting, deploying,                        functionality of mySAP ERP HCM, you must implement
developing, motivating, and retaining valuable employees,                          some of its personnel administration and organizational
improving these processes from end to end.                                         management functionality. mySAP ERP HCM provides basic
                                                                                   reporting capabilities, but for complete HCM analytics, you
mySAP ERP HCM offers a complete, integrated compensation                           must install the SAP® Business Intelligence component of the
management software solution that helps enterprises of all                         SAP NetWeaver™ platform, as well.
industries, sizes, and complexities to implement strategic

                                           BALANCED SCORECARD
                                                                                                                     SAP STRATEGIC ENTERPRISE
                                           • Define enterprise goals                                                             MANAGEMENT
  mySAP™ ERP HCM


                                           PERSONNEL COST PLANNING & SIMULATION
                                           • Plan costs & generate compensation budgets


   SALARY BENCHMARKING                     COMPENSATION BUDGETING                                                   OBJECTIVE SETTING &
   • Participate in salary surveys                                                                                  APPRAISALS
                                           • Create & distribute compensation budgets
   • Perform job pricing                                                                                            • Define team & individual goals
   • Maintain salary structures                                                                                     • Monitor and evaluate goals
                                                                                                                      achievement

                                           COMPENSATION ADMINISTRATION/PLANNING/REVIEW PROCESS
   LTI ADMINISTRATION                      • Perform compensation reviews and LTI granting
                                                                                                                    INCENTIVE & COMMISSION
   • Grant & administer LTIs                                                                                        MANAGEMENT (ICM)
                                                                                                                    • Calculate sales commissions
                                           PAYROLL                                                                    and incentives
                                           • Update payroll & master data
                                                                                                                mySAP ERP CORPORATE SERVICES




                                           SAP® BUSINESS INTELLIGENCE
                                           • Analysis and reporting                                                                 SAP NetWeaver

Figure 1: Overview of the Fully Integrated SAP Enterprise Compensation Management Solution



                                                                                                                                                       5
BUDGETING
To take advantage of mySAP ERP’s extended enterprise               With mySAP ERP HCM, your compensation specialists can
compensation management functionality and to implement             create budget structures for merit increases, performance
the most robust enterprise compensation management solution        bonuses, and long-term incentives (LTIs). You can then allocate
that SAP has to offer, you should implement the following          the budget pool of money (or the number of awards in the case
functions and applications available with mySAP ERP:               of LTIs) among the different budget units in your company.
• The objective setting and appraisals functionality of
  mySAP ERP HCM                                                    Compensation specialists can automatically generate budget
• The personnel cost planning and simulation functionality of      structures that are representative of your organizational
  mySAP ERP HCM                                                    structure. When required, they can manually edit the structure.
• The payroll functionality of mySAP ERP HCM                       When line managers plan and execute their employees’ per-
• SAP Employee Self-Service and SAP Manager Self-Service           formance awards, they can view these compensation budgets.
• SAP Incentive and Commission Management                          As they make changes, mySAP ERP HCM increments the spent
• SAP Strategic Enterprise Management (SAP SEM)                    value of the budget against the original distributed budget.
                                                                   This ensures managers follow budget policy and allows you to
Compensation management is closely linked with the solution’s      monitor compliance. You can configure mySAP ERP HCM to
objective setting and appraisals functionality, so you can auto-   allow or to prevent line managers from exceeding their budgets.
matically determine the appropriate rewards when employees
achieve particular goals.                                          The controlling unit of an organization usually manages
                                                                   compensation budgets. You can obtain planned HR expenses
Personnel cost planning and simulation functions help you          by using the personnel cost planning and simulation tool in
initially structure and compose compensation budgets.              mySAP ERP HCM. Because compensation budgeting and
                                                                   personnel cost planning and simulation are integrated,
You can directly transfer the results of sales commissions from    mySAP ERP HCM can automatically generate compensation
the SAP Incentive and Commission Management application of         budgets with data that comes directly from the respective cost
mySAP ERP to your payroll system for distribution to your em-      items defined in forecasts of HR expenses. Implementing this
ployees. The results can also be displayed in the compensation     functionality saves valuable time and effort when you create
planning tool in the SAP Manager Self-Service application so       compensation budgets. It also allows for detailed, bottom-up
managers have a complete picture of the remuneration their         budgeting in addition to traditional top-down budgeting.
employees receive.

For detailed compensation-related analysis and decision
support, the SAP Business Intelligence component of the
SAP NetWeaver platform provides specific compensation
datasets. The reports and analyses you need are based on these
datasets.




6
COMPENSATION
                                                                 Compensation Administration
                                                                 With mySAP ERP HCM, you can define and configure compen-
                                                                 sation plans that adhere to your corporate policies. You can also
                                                                 flexibly handle exceptions, when applicable.

                                                                 Line managers access compensation plan information via the
                                                                 compensation planning front-end tool in the SAP Manager
                                                                 Self-Service application. Within this Web-based tool, managers
                                                                 can simulate, plan, and adjust compensation for their
                                                                 employees. Line managers and approving managers can
                                                                 collaborate on proposed rewards and adjustments using
                                                                 built-in approval functions.

                                                                 The Compensation Plan Structure
Figure 2: Compensation Budget Maintenance with mySAP ERP         The central entity of compensation administration is the
                                                                 compensation plan, which is part of a compensation program.
You can manage the status of compensation budget structures,     Employees are assigned to compensation programs via the Com-
ensuring that the pool of money assigned can be used by line     pensation Program Infotype 0758. A compensation plan describes
managers only after final approval and release.                  the rules and structure of conditions of your employees’ com-
                                                                 pensation and how it is treated in the compensation administra-
You can also reassign budget amounts during organizational       tion process. Rules include eligibility, guidelines, and proration.
changes from the time the budget is released to its total
depletion. This function allows you to reassign the total dis-   For payroll integration, each compensation plan is assigned to a
tributed and spent budgeted amount to another organizational     compensation category, and the payment (or number of LTI
unit.                                                            awards) is stored in the corresponding payroll and compen-
                                                                 sation infotypes. The compensation categories are:
You can keep track of budget distribution and usage across all   • Salary adjustment: Basic Pay (Infotype 0008)
levels of your organizational structure using the budget         • Regular bonus: Additional Payments (Infotype 0015)
auditing report.                                                 • Off-cycle bonus: One-Time Payments Off-Cycle (Infotype 0267)
                                                                 • LTI grant: LTI Grant (Infotype 0761)
                                                                 In addition, you can apply company-specific infotypes by using
                                                                 a business add-in.

                                                                 With mySAP ERP HCM, you can review compensation informa-
                                                                 tion, including the attributes stored, the review period, and the
                                                                 selection period. You can also define intervals during which a
                                                                 manager is allowed to process a compensation plan, which is
                                                                 referred to as compensation review.



                                                                                                                                   7
The combination of compensation review and compensation             • Guidelines
plan forms a new compensation review item. An example of a            Guidelines determine default values that should be given to
compensation review item is an award that has to be presented         an employee according to your compensation policy and
within a certain time frame and takes into account employees          regulations. You can use amounts, percentages, or numbers
who have been with the company for a specified time period. A         of LTI awards. Guideline values can be based on different
manager can only select a given review during that valid period       criteria, such as an appraisal rating, specific target achieve-
of time. The selection period dates define the time period on         ments, or for example, the compa-ratio of an employee. You
which the selection of employees is based.                            can combine up to three criteria when you define a guideline,
                                                                      which allows you to build a multidimensional matrix for the
If a review is flagged as an “any-time” review, then you can          guidelines. You can configure guidelines to allow managers to
process a compensation plan several times throughout the year         overwrite the default values. The solution can also suggest
and more than once within a certain time frame. This approach         default ranges, and managers can choose final values within
is typically used to implement spot bonus programs.                   those ranges. You can also define whether managers should
                                                                      be allowed to go beyond those ranges or not.
You can also define compensation plans globally. Depending on       • Proration
the country, you can assign specific employee attributes. The         If an employee has fulfilled the eligibility requirements for
main attributes of a compensation plan are the following:             a particular compensation plan during only a part of the
• Eligibility                                                         evaluation period, you can reduce the suggested guideline
  Eligibility rules determine whether an employee can receive a       value based on the fraction of time during which the require-
  reward against a certain compensation plan. If an employee          ment was fulfilled. This reduction is called proration and is
  fulfills the detailed criteria defined for eligibility, such as     enabled by applying a proration rule to an existing guideline
  service requirements, job, pay scale and grade, appraisals,         rule. The evaluation period is a time interval upon which
  and target achievements, that employee is considered to be          eligibility and proration evaluations are based. Its beginning
  eligible. You can override the evaluation of this criterion         and ending dates are attributes of the compensation review
  using a special infotype – Eligibility Override (Infotype 0760)     item.
  – which manages exceptions handling. The evaluation of            • Rounding
  eligibility can be both time period and date specific.              You can configure the rounding type and amount for each
                                                                      compensation plan, after which rounding takes place
                                                                      automatically.
                                                                    • Cost item
                                                                      You can assign cost items from the personnel cost planning
                                                                      and simulation tool of mySAP ERP HCM to a compensation
                                                                      plan. This integrates values from the compensation guidelines
                                                                      for the data collection in cost planning and forecasting.




8
The Back-End Flow of the Compensation Process                               Compensation Planning for Front-End
The Compensation Process Infotype (0759) serves as a common                 User Processes
source to store and administer the compensation process flow                The solution includes two different user interfaces to support
for all adjustments. The solution automatically creates this                compensation processes for line managers and HR adminis-
infotype when a manager saves a proposed reward using the                   trators. Managers can access a new version of the SAP Manager
compensation planning sheet in the SAP Manager Self-Service                 Self-Service application. By using the HR master data mainte-
(MSS) application. You can create or change a secondary info-               nance transaction, compensation specialists can maintain
type record only after it is activated, which is carried out                compensation transactions directly on the Compensation
centrally by the HR department. The infotype that is updated                Process Infotype (0759). Mass processing of rewards is also
depends on the category for payment defined in the compen-                  available.
sation plan. The infotype can be Salary Adjustment (0008),
Regular Bonus (0015), Off-Cycle Bonus (0267), and LTI Grant                 The line manager’s user interface captures information on
(0761), which is sent to the bank for further processing. The               employee performance, jobs, salary guidelines, budgets, and
LTI Exercising Infotype (0762) is needed to store exercising data           much more. It provides expert knowledge and situation-specific
coming back from the bank. More details of the LTI design are               guidance in an intuitive, user-friendly format and enables
described in the following discussion of long-term incentives.              more efficient salary planning across the enterprise. It includes
Figure 3 gives an overview of this compensation process.                    everything managers need for visibility and control over
                                                                            compensation budgets. Line managers can access expert
                                                                            information and resources to make strategic, equitable, policy-
                              MSS User Interface                            based compensation decisions.
                               Salary/Bonus/LTI

                                         SAVING
                                                                            For employees eligible for a specific compensation plan,
                                Business Logic                              managers can change the compensation data, such as the
                             Compensation Process
                                                                            amount or percentage for monetary plans, or the number of
                                                                            grants for LTI plans and the effective date provided that you
                                   IT 0759
                             Compensation Process                           allow this. In addition, they can perform any of the following
                                         ACTIVATION                         functions:
                                                                            • Enter compensation data
      IT 0008        IT 0015              IT 0267             IT 0761
                                                                            • Apply percentage
     Basic Pay    Add’l Payments    Off-Cycle Payments       LTI Grant      • Clear entries
                                                                            • Apply guideline
                                                              IT 0762       • Raise employees to minimum of salary range
                                                           LTI Exercising
                                                                            • Select a new currency
                                                                            • Create and store notes for each employee
Figure 3: Architecture of the Compensation Process and Infotypes            • Save compensation data
                                                                            • Submit compensation data
                                                                            • Exit




                                                                                                                                             9
SAP Manager Self-Service fully supports the approval process.
The following functions are available:
• Approve
• Reject
• Check planned compensation
• Store notes for each employee
• Exit
There are two ways to determine which columns of informa-
tion appear on the SAP Manager Self-Service screen. You can
configure the columns in the back-end through configuration,
and managers can easily personalize the columns provided after
implementation. The main standard SAP-delivered columns
                                                                   Figure 4: Sample Column Setup for a Salary Adjustment Plan Within
contain the following data:                                                  SAP Manager Self-Service
• Appraisal data
• Commissions (Infotype 0579)                                      You can display any kind of compensation-related information
• Compa-ratio (current)                                            on each employee just by clicking on their name. You can also
• Percent in range (current)                                       graphically display comparisons of planned, actual, and survey
• Guideline                                                        salary data, the distribution of planned compensation changes,
• Hire date                                                        and compensation histories.
• Job
• Name
• Position
• New salary
• New compa-ratio
• New percent in range
• Notes
Special function modules fill the columns dynamically. Cus-
tomers can easily define and fill columns with customer-specific
data if required.




10
LONG-TERM INCENTIVES
With mySAP ERP HCM, you can create and manage long-term             a manager in SAP Manager Self-Service. The LTI Exercising
incentives.                                                         Infotype (0762) contains the data about the exercising of LTIs,
                                                                    which comes from the bank via a standard banking interface.
LTI administration is integrated with compensation adminis-
tration functions, which delivers several advantages:               The Participant Data Infotype (0763) contains LTI plan partici-
• You can grant and approve LTI awards from SAP Manager             pant information that is to be sent to the bank. You can store
  Self-Service.                                                     the following information:
• You can budget for LTIs as you can for salary increases and       • Insider
  bonuses.                                                          • Director
• You can use the guidelines and eligibility requirements used      • Owner percentage
  for compensation administration to grant LTIs.
                                                                    Life events can influence the expiration date and the vesting
The LTI plan is one possible type of compensation plan. LTI         schedule of an LTI plan for an employee. The HR administrator
plans have the following primary attributes:                        can maintain the life event and its effects by running the appro-
• Vesting schedule                                                  priate report provided for life event processing, for example, the
  Determines when awards are vested so employees can exercise       vesting schedule changes on the LTI Grant Infotype (0761).
  them. This vesting schedule is valid for an entire LTI plan and
  can also be overwritten at the individual level in the LTI                        DATA FLOW DIAGRAM OF THE LTI FUNCTIONS
  Grant Infotype (0761). The vesting schedule is sent to
                                                                                             Line
  accounting and to your company’s bank or broker.                                          Manager                              LTI Participant
• Exercise windows                                                                                                                Data (0763)

  Describe periods of time during which employees can exercise                               Granting
                                                                                                             Compensation
                                                                                                               Process
  their awards. The exercise window rule is assigned to an LTI                               in MSS
                                                                                                               (IT 0759)
  plan. The exercising window rules from customization can
                                                                                                               Activation of
  be overwritten on the LTI Grant Infotype (0761) to handle                                  Cancel                                  HR
                                                                                                              Infotype 0759
                                                                                             LTI Plan                            Administrator
  exceptions at the employee level. The exercise window rule
  information is sent to the bank via a standard banking                                                                           Interface of
                                                                      Compensation           Convert            LTI Grant
                                                                                                                                  granting data
  interface.                                                            Specialist          Stock Unit          (IT 0761)
                                                                                                                                 to bank/broker
• Exercise price
  The exercise price flag determines whether the exercise price        Accounting          Accounting
                                                                       Department           Interface
  is determined at the date of exercise or is to be maintained in
  the LTI Grant Infotype (0761) at the time of granting.                                                                            Interface of
                                                                         Payroll                              LTI Exercising      exercising data
                                                                                              Payroll
                                                                         Results                                (IT 0762)       from bank/broker
LTI Infotypes 0761 and 0762 are for granting and exercising,
respectively. As mentioned above, the LTI Grant Infotype is                HR
                                                                                            Reporting
                                                                       Administrator
filled when you activate the Compensation Process Infotype                                                                          Bank/
(0759), which is created automatically when LTIs are granted by                                                                     Broker
                                                                           HR               SAP® BI
                                                                        Executive           Extractor


                                                                    Figure 5: Integration Points and Infotypes Affected by the LTI Process



                                                                                                                                                    11
JOB PRICING
LTI Interfaces                                                      mySAP ERP HCM delivers extensive salary benchmarking
mySAP ERP HCM has LTI interfaces to the following areas:            functions so your compensation professionals can analyze your
• Accounting                                                        company’s pay policy and pay structure for market competitive-
  The solution provides a function module to the accounting         ness. They can also determine the best possible compensation
  capabilities of mySAP ERP. The accrual engine needs LTI data      strategy revisions, quickly and accurately.
  to compute provisions for awards.
• The bank                                                          SAP has developed a new job pricing tool for compensation
  The solution provides an outbound interface for LTI granting      specialists. With this tool they can:
  and participation data and an inbound interface for exercising    • Create and maintain an unlimited number of salary survey
  data for data exchange with banks and brokers. These inter-         providers
  faces are XML interfaces and are compliant to the standards of    • Import and store salary survey data from any number of
  the HR-XML Consortium.                                              providers, update data as needed, and maintain a history of
• Budgeting                                                           previous market data
  Allocated and spent budgets can be converted as a conse-          • Age salary survey market data
  quence of a stock split. Therefore, budgeting needs to use an     • Match internal benchmark jobs to survey jobs from multiple
  LTI function module to convert budgets from one stock unit          salary survey providers
  into another.                                                     • Apply a weighting factor against various matched jobs from
• SAP Business Intelligence (SAP BI)                                  different providers
  SAP BI handles granting, exercising, and vesting data. You call   • Establish market composite results for jobs and compare
  the appropriate extractors from SAP BI and adjust them to           internal salaries against blended market data supported by
  the new data model.                                                 graphical tools
• Compensation administration                                       • Adjust internal salary structures based on market findings,
  LTI functions are closely connected to compensation admin-          including performing regression analyses supported by
  istration. An important program interface between the two           graphical tools
  functions is the activation process of the Compensation           • Extract company compensation data to participate in salary
  Process Infotype (IT 0759). The LTI function provides a             surveys
  function module as part of the activation. Compensation           • Link to SAP Business Intelligence to run sophisticated
  administration uses LTI function modules to convert the             analytics and reports
  number of awards from one stock unit to another.
• Payroll                                                           Figure 6 shows the job pricing business process, including all the
  Payroll evaluates the LTI Exercising Infotype (IT 0762). You      steps involved and supported by mySAP ERP HCM.
  define the wage types for the respective amounts and the
  payroll engine can calculate the appropriate tax. The tax
  calculation is delivered in the international payroll engine,
  along with specifics for German and U. S. regulations.
• Total compensation statement
  The total compensation statement shows the number of
  granted awards and the granting date. This data is read from
  the LTI Grant Infotype (IT 0761).



12
BUSINESS PROCESS OF MARKET PRICING OVERVIEW (GENERAL)

 JOB ANALYSIS               SELECT SURVEY             RECEIVE SURVEY
                            PROVIDER                  DATA SUBMISSION
 • Create internal jobs     • Organization decides    FORM (ONLINE, DISK,
   and job descriptions       which salary surveys    EXCEL, ETC) FROM
                              to participate in       SURVEY PROVIDERS



 IMPORT DATA                JOB MATCHING              AGE DATA
 • Upload job catalog,      • Match internal jobs     • Age market data to
   descriptions, and          to survey jobs            evaluation date
   market data to the
   system



 WEIGHT DATA                COMPILE MARKET            DATA ANALYSIS
                            DATA
 • Weight market data       • Create market           • Evaluate and compare
   from different             composite result for      to current internal
   providers                  internal jobs from        compensation
                              matched survey jobs



 DETERMINE MARKET           PHILOSOPHY                IDENTIFY TARGETS
 GAP
 • Identify which jobs or   • Determine or create     • Create market targets
   job families require       compensation              for certain jobs or job
   adjustments                philosophy                families



 ADJUST SALARY              ACTIVATE
 STRUCTURE                  ADJUSTMENT                                            Figure 7: Comparison of Market Composite Result to Employees’ Payment
 • Create proposal for      • Adjust the current
   salary structure           salary structure with
   adjustments to “lead”      the new structure
   or “lag” the market


Figure 6: Overview of the Salary Benchmarking Business Process


Once you have imported market data from the survey
providers, you create market composite results. This infor-
mation is stored in the new composite Survey Result Infotype
(IT 1271) for each internal benchmark job. You can then
compare market pay and your company pay for employees,
positions, or jobs. You can create multiple composite results,
so you can compare different market movement assumptions,
provider weightings, and market data aging factors.




                                                                                                                                                          13
AT-A-GLANCE ENTERPRISE COMPENSATION MANAGEMENT
INFOTYPES AND ARCHITECTURE OVERVIEW
You can access and maintain all Infotypes using the mySAP ERP
HCM master data maintenance function. The solution includes
the following infotypes for enterprise compensation
management:
• Compensation Programs (IT 0758)
• Compensation Process (IT 0759)
• Compensation Eligibility Override (IT 0760)
• LTI Grant (IT 0761)
• LTI Exercising (IT 0762)
• LTI Participant Data (IT 0763)
• Composite Survey Result (IT 1271)


                              HR                                    COMPENSATION
        EMPLOYEE                                MANAGER                                                   HR EXECUTIVE   USERS
                         ADMINISTRATOR                                SPECIALIST



                          MASTER DATA                                BUDGETING         JOB PRICING
           ESS                USER                 MSS                  USER              USER                           FRONT END
                           INTERFACE                                  INTERFACE         INTERFACE




                                LTI          COMPENSATION            BUDGETING         JOB PRICING
         TOTAL           ADMINISTRATION      ADMINISTRATION
        COMPEN-            EXERCISING
         SATION                                                                                                          BACK END
                             (IT0762)           COMPENSA-                                SURVEY
       STATEMENT            GRANTING          TION PROCESS                               RESULTS
                             (IT0761)             (IT0759)            BUDGETS             (IT1271)




                                                      PAY DATA                 SALARY                                    DATABASE
                                                    (IT0008 ETC.)            STRUCTURES




                                                                     PERSONNEL
                                                    MBO/                                                      BW         OTHER SAP
       PAYROLL      ACCRUAL         TREASURY                            COST
                                                 APPRAISALS                                                REPORTING     COMPONENTS
                                                                      PLANNING



                              BANK/                                                     SURVEY                           EXTERNAL
                             BROKER                                                    PROVIDERS                         COMPONENTS


Figure 8: Overview of the Enterprise Compensation Management Architecture Including User Roles and User Interfaces




14
SAP EMPLOYEE SELF-
SERVICE AND THE TOTAL                                              COMPLETE REPORTING
COMPENSATION STATEMENT                                             CAPABILITIES
Using SAP Employee Self-Service, employees can always see a        mySAP ERP HCM provides basic reporting capabilities. You can
total compensation statement – the compensation they               view and format tabular report results in the SAP list viewer
received from their employer during certain time periods.          tool. Using this tool you can:
This statement, which can be customized, can be in multiple        • Filter data
formats, including Smart Forms and Adobe Acrobat Reader.           • Total and subtotal data
The statement can be printed individually or in bulk.              • Sort data
                                                                   • Display data in Microsoft Excel and Crystal Reports
The total compensation statement can include sales commis-         • Define your own report layouts
sion from SAP Commission and Incentive Management. It lists        • Export data to Microsoft Word and Microsoft Excel
data from four different areas within mySAP ERP HCM:
• Payroll, including salary and bonus                              By implementing SAP Business Intelligence, you can execute
• Benefits, including health plans, insurance plans, savings       more sophisticated reports that go far beyond these functions.
   plans, flexible spending accounts, miscellaneous plans, stock   SAP Business Intelligence contains a special enterprise compen-
   purchase plans, and credit plans                                sation management InfoCube (a type of SAP dataset) and
• Other compensation, including LTIs                               queries that you can use to analyze all of your compensation
• Personnel development, including additional education and        data in detail. SAP Business Intelligence delivers more than
   training and individual development plans                       30 standard queries with enterprise compensation management
                                                                   content.




                                                                                                                                15
THE ADVANTAGES OF
INTEGRATED ENTERPRISE
COMPENSATION
MANAGEMENT
mySAP ERP offers an integrated solution for enterprise com-
pensation management that delivers the following advantages:
• Broad, real-time, and reliable information availability and
  exchange for decision making
• Strategic personnel management and support for your overall
  enterprise strategy
• Integration with all vital SAP components inside and outside
  mySAP ERP, as well as with third-party interfaces, ensuring
  communication with all parties involved and full support of
  the entire enterprise compensation management process
• Improved productivity through user-centric applications that
  ensure HR professionals and managers have the right tools
  and an easy-to-use interface
• Unlimited reporting capabilities through standard reports,
  extensive SAP Business Intelligence reports, and ad hoc query
  capabilities so you can take immediate action when required
• Flexible customizing to ensure that you can set up all possible
  compensation plans according to your specific needs

And the advantages just keep coming. To help you cope with
change, SAP continuously improves mySAP ERP. Enhancements
to the solution’s enterprise compensation management features
and functions will ensure an even greater ability for your com-
pany to implement a flexible strategic compensation policy,
supported by a comprehensive compensation management
solution that helps you achieve your goals.

To learn more about mySAP ERP, visit the SAP Web site at
www.sap.com/solutions/erp




16
17
18
www.sap.com /contactsap




50 070 704 (04/10)

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ENTERPRISE COMPENSATION MANAGEMENT WITH mySAP™ ERP

  • 1. SAP Solution in Detail mySAP ERP ENTERPRISE COMPENSATION MANAGEMENT WITH mySAP™ ERP
  • 2. © Copyright 2004 SAP AG. All rights reserved. HTML, XML, XHTML and W3C are trademarks or registered trademarks of W3C®, World Wide Web Consortium, No part of this publication may be reproduced or transmitted Massachusetts Institute of Technology. in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed Java is a registered trademark of Sun Microsystems, Inc. without prior notice. JavaScript is a registered trademark of Sun Microsystems, Inc., Some software products marketed by SAP AG and its distri- used under license for technology invented and implemented butors contain proprietary software components of other by Netscape. software vendors. MaxDB is a trademark of MySQL AB, Sweden. Microsoft, Windows, Outlook, and PowerPoint are registered trademarks of Microsoft Corporation. SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, and other SAP products and services mentioned herein as well IBM, DB2, DB2 Universal Database, OS/2, Parallel Sysplex, as their respective logos are trademarks or registered trademarks MVS/ESA, AIX, S/390, AS/400, OS/390, OS/400, iSeries, pSeries, of SAP AG in Germany and in several other countries all over xSeries, zSeries, z/OS, AFP, Intelligent Miner, WebSphere, the world. All other product and service names mentioned are Netfinity, Tivoli, and Informix are trademarks or registered the trademarks of their respective companies. Data contained in trademarks of IBM Corporation in the United States and/or this document serves informational purposes only. National other countries. product specifications may vary. Oracle is a registered trademark of Oracle Corporation. These materials are subject to change without notice. These materials are provided by SAP AG and its affiliated companies UNIX, X/Open, OSF/1, and Motif are registered trademarks (“SAP Group”) for informational purposes only, without of the Open Group. representation or warranty of any kind, and SAP Group shall not be liable for errors or omissions with respect to the materials. Citrix, ICA, Program Neighborhood, MetaFrame, WinFrame, The only warranties for SAP Group products and services are VideoFrame, and MultiWin are trademarks or registered those that are set forth in the express warranty statements trademarks of Citrix Systems, Inc. accompanying such products and services, if any. Nothing herein should be construed as constituting an additional warranty. 2
  • 3. CONTENTS Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Building an Enterprise Compensation Management Strategy . . . . . . . . . . . . . . . . . . . . . . . . . 4 Complete Enterprise Compensation with mySAP ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Budgeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Compensation Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 – The Compensation Plan Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 – The Back-End Flow of the Compensation Process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 – Compensation Planning for Front-End User Processes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 LTI Interfaces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Job Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 At-a-Glance Enterprise Compensation Management Infotypes and Architecture Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SAP Employee Self-Service and the Total Compensation Statement . . . . . . . . . . . . . . . . . . 15 Complete Reporting Capabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 The Advantages of Integrated Enterprise Compensation Management . . . . . . . . . . . . . . . 17 3
  • 4. BUILDING AN ENTERPRISE COMPENSATION EXECUTIVE SUMMARY MANAGEMENT STRATEGY An enterprise compensation management strategy is crucial In an expanding economy, human resources are scarce, and for dealing with a rapidly changing business climate and it’s important to attract and retain the best people. In a making the most of human resources in the best – and worst – recessionary economy, human capital is a major expense that of economic times. mySAP™ ERP Human Capital Management needs to be controlled effectively. But no matter what the (mySAP ERP HCM) provides a complete solution for enterprise global economic situation may be, you need maximum insight compensation management, budget handling, compensation and flexibility to manage enterprise compensation. You also administration, long-term incentives, job pricing, and need the ability to adapt dynamically to ever-changing reporting. circumstances. With a comprehensive compensation management solution, you can define a strategic compensation policy that applies throughout your enterprise – one that motivates employees to support business goals, allows you to respond to change, and improves your company’s bottom line. And one that enables you to track, monitor, plan, simulate, and execute that strategy precisely. A comprehensive compensation management solution achieves this by integrating all relevant human resources (HR) processes, including the administration of fixed and variable pay, long-term incentives (LTIs), performance management, compensation budgeting, personnel cost planning, salary benchmarking, and payroll. 4
  • 5. COMPLETE ENTERPRISE COMPENSATION WITH mySAP™ ERP With mySAP ERP Human Capital Management (mySAP ERP compensation techniques and achieve their strategic goals. HCM), you can maximize the value of your employees and align The solution can help you build effective employee compen- employee skills, activities, and incentives with business objectives sation programs and support your company’s compensation and strategies. mySAP ERP HCM also provides the tools to man- management processes. With numerous integration points, age, measure, and reward individual and team contributions. mySAP ERP HCM is a true end-to-end solution that powers a fully integrated enterprise compensation management process. By leveraging integrated HCM tools, you’ll gain insight into – mySAP ERP HCM supports the major areas in enterprise and control over – increasingly virtual workforces. Adapt your compensation management: budgeting, compensation admin- workforce and IT investments quickly and easily. And signifi- istration and planning, long-term incentive administration, cantly improve productivity as employees focus more time on and job pricing. value-added activities. To implement all SAP enterprise compensation management mySAP ERP HCM supports processes for recruiting, deploying, functionality of mySAP ERP HCM, you must implement developing, motivating, and retaining valuable employees, some of its personnel administration and organizational improving these processes from end to end. management functionality. mySAP ERP HCM provides basic reporting capabilities, but for complete HCM analytics, you mySAP ERP HCM offers a complete, integrated compensation must install the SAP® Business Intelligence component of the management software solution that helps enterprises of all SAP NetWeaver™ platform, as well. industries, sizes, and complexities to implement strategic BALANCED SCORECARD SAP STRATEGIC ENTERPRISE • Define enterprise goals MANAGEMENT mySAP™ ERP HCM PERSONNEL COST PLANNING & SIMULATION • Plan costs & generate compensation budgets SALARY BENCHMARKING COMPENSATION BUDGETING OBJECTIVE SETTING & • Participate in salary surveys APPRAISALS • Create & distribute compensation budgets • Perform job pricing • Define team & individual goals • Maintain salary structures • Monitor and evaluate goals achievement COMPENSATION ADMINISTRATION/PLANNING/REVIEW PROCESS LTI ADMINISTRATION • Perform compensation reviews and LTI granting INCENTIVE & COMMISSION • Grant & administer LTIs MANAGEMENT (ICM) • Calculate sales commissions PAYROLL and incentives • Update payroll & master data mySAP ERP CORPORATE SERVICES SAP® BUSINESS INTELLIGENCE • Analysis and reporting SAP NetWeaver Figure 1: Overview of the Fully Integrated SAP Enterprise Compensation Management Solution 5
  • 6. BUDGETING To take advantage of mySAP ERP’s extended enterprise With mySAP ERP HCM, your compensation specialists can compensation management functionality and to implement create budget structures for merit increases, performance the most robust enterprise compensation management solution bonuses, and long-term incentives (LTIs). You can then allocate that SAP has to offer, you should implement the following the budget pool of money (or the number of awards in the case functions and applications available with mySAP ERP: of LTIs) among the different budget units in your company. • The objective setting and appraisals functionality of mySAP ERP HCM Compensation specialists can automatically generate budget • The personnel cost planning and simulation functionality of structures that are representative of your organizational mySAP ERP HCM structure. When required, they can manually edit the structure. • The payroll functionality of mySAP ERP HCM When line managers plan and execute their employees’ per- • SAP Employee Self-Service and SAP Manager Self-Service formance awards, they can view these compensation budgets. • SAP Incentive and Commission Management As they make changes, mySAP ERP HCM increments the spent • SAP Strategic Enterprise Management (SAP SEM) value of the budget against the original distributed budget. This ensures managers follow budget policy and allows you to Compensation management is closely linked with the solution’s monitor compliance. You can configure mySAP ERP HCM to objective setting and appraisals functionality, so you can auto- allow or to prevent line managers from exceeding their budgets. matically determine the appropriate rewards when employees achieve particular goals. The controlling unit of an organization usually manages compensation budgets. You can obtain planned HR expenses Personnel cost planning and simulation functions help you by using the personnel cost planning and simulation tool in initially structure and compose compensation budgets. mySAP ERP HCM. Because compensation budgeting and personnel cost planning and simulation are integrated, You can directly transfer the results of sales commissions from mySAP ERP HCM can automatically generate compensation the SAP Incentive and Commission Management application of budgets with data that comes directly from the respective cost mySAP ERP to your payroll system for distribution to your em- items defined in forecasts of HR expenses. Implementing this ployees. The results can also be displayed in the compensation functionality saves valuable time and effort when you create planning tool in the SAP Manager Self-Service application so compensation budgets. It also allows for detailed, bottom-up managers have a complete picture of the remuneration their budgeting in addition to traditional top-down budgeting. employees receive. For detailed compensation-related analysis and decision support, the SAP Business Intelligence component of the SAP NetWeaver platform provides specific compensation datasets. The reports and analyses you need are based on these datasets. 6
  • 7. COMPENSATION Compensation Administration With mySAP ERP HCM, you can define and configure compen- sation plans that adhere to your corporate policies. You can also flexibly handle exceptions, when applicable. Line managers access compensation plan information via the compensation planning front-end tool in the SAP Manager Self-Service application. Within this Web-based tool, managers can simulate, plan, and adjust compensation for their employees. Line managers and approving managers can collaborate on proposed rewards and adjustments using built-in approval functions. The Compensation Plan Structure Figure 2: Compensation Budget Maintenance with mySAP ERP The central entity of compensation administration is the compensation plan, which is part of a compensation program. You can manage the status of compensation budget structures, Employees are assigned to compensation programs via the Com- ensuring that the pool of money assigned can be used by line pensation Program Infotype 0758. A compensation plan describes managers only after final approval and release. the rules and structure of conditions of your employees’ com- pensation and how it is treated in the compensation administra- You can also reassign budget amounts during organizational tion process. Rules include eligibility, guidelines, and proration. changes from the time the budget is released to its total depletion. This function allows you to reassign the total dis- For payroll integration, each compensation plan is assigned to a tributed and spent budgeted amount to another organizational compensation category, and the payment (or number of LTI unit. awards) is stored in the corresponding payroll and compen- sation infotypes. The compensation categories are: You can keep track of budget distribution and usage across all • Salary adjustment: Basic Pay (Infotype 0008) levels of your organizational structure using the budget • Regular bonus: Additional Payments (Infotype 0015) auditing report. • Off-cycle bonus: One-Time Payments Off-Cycle (Infotype 0267) • LTI grant: LTI Grant (Infotype 0761) In addition, you can apply company-specific infotypes by using a business add-in. With mySAP ERP HCM, you can review compensation informa- tion, including the attributes stored, the review period, and the selection period. You can also define intervals during which a manager is allowed to process a compensation plan, which is referred to as compensation review. 7
  • 8. The combination of compensation review and compensation • Guidelines plan forms a new compensation review item. An example of a Guidelines determine default values that should be given to compensation review item is an award that has to be presented an employee according to your compensation policy and within a certain time frame and takes into account employees regulations. You can use amounts, percentages, or numbers who have been with the company for a specified time period. A of LTI awards. Guideline values can be based on different manager can only select a given review during that valid period criteria, such as an appraisal rating, specific target achieve- of time. The selection period dates define the time period on ments, or for example, the compa-ratio of an employee. You which the selection of employees is based. can combine up to three criteria when you define a guideline, which allows you to build a multidimensional matrix for the If a review is flagged as an “any-time” review, then you can guidelines. You can configure guidelines to allow managers to process a compensation plan several times throughout the year overwrite the default values. The solution can also suggest and more than once within a certain time frame. This approach default ranges, and managers can choose final values within is typically used to implement spot bonus programs. those ranges. You can also define whether managers should be allowed to go beyond those ranges or not. You can also define compensation plans globally. Depending on • Proration the country, you can assign specific employee attributes. The If an employee has fulfilled the eligibility requirements for main attributes of a compensation plan are the following: a particular compensation plan during only a part of the • Eligibility evaluation period, you can reduce the suggested guideline Eligibility rules determine whether an employee can receive a value based on the fraction of time during which the require- reward against a certain compensation plan. If an employee ment was fulfilled. This reduction is called proration and is fulfills the detailed criteria defined for eligibility, such as enabled by applying a proration rule to an existing guideline service requirements, job, pay scale and grade, appraisals, rule. The evaluation period is a time interval upon which and target achievements, that employee is considered to be eligibility and proration evaluations are based. Its beginning eligible. You can override the evaluation of this criterion and ending dates are attributes of the compensation review using a special infotype – Eligibility Override (Infotype 0760) item. – which manages exceptions handling. The evaluation of • Rounding eligibility can be both time period and date specific. You can configure the rounding type and amount for each compensation plan, after which rounding takes place automatically. • Cost item You can assign cost items from the personnel cost planning and simulation tool of mySAP ERP HCM to a compensation plan. This integrates values from the compensation guidelines for the data collection in cost planning and forecasting. 8
  • 9. The Back-End Flow of the Compensation Process Compensation Planning for Front-End The Compensation Process Infotype (0759) serves as a common User Processes source to store and administer the compensation process flow The solution includes two different user interfaces to support for all adjustments. The solution automatically creates this compensation processes for line managers and HR adminis- infotype when a manager saves a proposed reward using the trators. Managers can access a new version of the SAP Manager compensation planning sheet in the SAP Manager Self-Service Self-Service application. By using the HR master data mainte- (MSS) application. You can create or change a secondary info- nance transaction, compensation specialists can maintain type record only after it is activated, which is carried out compensation transactions directly on the Compensation centrally by the HR department. The infotype that is updated Process Infotype (0759). Mass processing of rewards is also depends on the category for payment defined in the compen- available. sation plan. The infotype can be Salary Adjustment (0008), Regular Bonus (0015), Off-Cycle Bonus (0267), and LTI Grant The line manager’s user interface captures information on (0761), which is sent to the bank for further processing. The employee performance, jobs, salary guidelines, budgets, and LTI Exercising Infotype (0762) is needed to store exercising data much more. It provides expert knowledge and situation-specific coming back from the bank. More details of the LTI design are guidance in an intuitive, user-friendly format and enables described in the following discussion of long-term incentives. more efficient salary planning across the enterprise. It includes Figure 3 gives an overview of this compensation process. everything managers need for visibility and control over compensation budgets. Line managers can access expert information and resources to make strategic, equitable, policy- MSS User Interface based compensation decisions. Salary/Bonus/LTI SAVING For employees eligible for a specific compensation plan, Business Logic managers can change the compensation data, such as the Compensation Process amount or percentage for monetary plans, or the number of grants for LTI plans and the effective date provided that you IT 0759 Compensation Process allow this. In addition, they can perform any of the following ACTIVATION functions: • Enter compensation data IT 0008 IT 0015 IT 0267 IT 0761 • Apply percentage Basic Pay Add’l Payments Off-Cycle Payments LTI Grant • Clear entries • Apply guideline IT 0762 • Raise employees to minimum of salary range LTI Exercising • Select a new currency • Create and store notes for each employee Figure 3: Architecture of the Compensation Process and Infotypes • Save compensation data • Submit compensation data • Exit 9
  • 10. SAP Manager Self-Service fully supports the approval process. The following functions are available: • Approve • Reject • Check planned compensation • Store notes for each employee • Exit There are two ways to determine which columns of informa- tion appear on the SAP Manager Self-Service screen. You can configure the columns in the back-end through configuration, and managers can easily personalize the columns provided after implementation. The main standard SAP-delivered columns Figure 4: Sample Column Setup for a Salary Adjustment Plan Within contain the following data: SAP Manager Self-Service • Appraisal data • Commissions (Infotype 0579) You can display any kind of compensation-related information • Compa-ratio (current) on each employee just by clicking on their name. You can also • Percent in range (current) graphically display comparisons of planned, actual, and survey • Guideline salary data, the distribution of planned compensation changes, • Hire date and compensation histories. • Job • Name • Position • New salary • New compa-ratio • New percent in range • Notes Special function modules fill the columns dynamically. Cus- tomers can easily define and fill columns with customer-specific data if required. 10
  • 11. LONG-TERM INCENTIVES With mySAP ERP HCM, you can create and manage long-term a manager in SAP Manager Self-Service. The LTI Exercising incentives. Infotype (0762) contains the data about the exercising of LTIs, which comes from the bank via a standard banking interface. LTI administration is integrated with compensation adminis- tration functions, which delivers several advantages: The Participant Data Infotype (0763) contains LTI plan partici- • You can grant and approve LTI awards from SAP Manager pant information that is to be sent to the bank. You can store Self-Service. the following information: • You can budget for LTIs as you can for salary increases and • Insider bonuses. • Director • You can use the guidelines and eligibility requirements used • Owner percentage for compensation administration to grant LTIs. Life events can influence the expiration date and the vesting The LTI plan is one possible type of compensation plan. LTI schedule of an LTI plan for an employee. The HR administrator plans have the following primary attributes: can maintain the life event and its effects by running the appro- • Vesting schedule priate report provided for life event processing, for example, the Determines when awards are vested so employees can exercise vesting schedule changes on the LTI Grant Infotype (0761). them. This vesting schedule is valid for an entire LTI plan and can also be overwritten at the individual level in the LTI DATA FLOW DIAGRAM OF THE LTI FUNCTIONS Grant Infotype (0761). The vesting schedule is sent to Line accounting and to your company’s bank or broker. Manager LTI Participant • Exercise windows Data (0763) Describe periods of time during which employees can exercise Granting Compensation Process their awards. The exercise window rule is assigned to an LTI in MSS (IT 0759) plan. The exercising window rules from customization can Activation of be overwritten on the LTI Grant Infotype (0761) to handle Cancel HR Infotype 0759 LTI Plan Administrator exceptions at the employee level. The exercise window rule information is sent to the bank via a standard banking Interface of Compensation Convert LTI Grant granting data interface. Specialist Stock Unit (IT 0761) to bank/broker • Exercise price The exercise price flag determines whether the exercise price Accounting Accounting Department Interface is determined at the date of exercise or is to be maintained in the LTI Grant Infotype (0761) at the time of granting. Interface of Payroll LTI Exercising exercising data Payroll Results (IT 0762) from bank/broker LTI Infotypes 0761 and 0762 are for granting and exercising, respectively. As mentioned above, the LTI Grant Infotype is HR Reporting Administrator filled when you activate the Compensation Process Infotype Bank/ (0759), which is created automatically when LTIs are granted by Broker HR SAP® BI Executive Extractor Figure 5: Integration Points and Infotypes Affected by the LTI Process 11
  • 12. JOB PRICING LTI Interfaces mySAP ERP HCM delivers extensive salary benchmarking mySAP ERP HCM has LTI interfaces to the following areas: functions so your compensation professionals can analyze your • Accounting company’s pay policy and pay structure for market competitive- The solution provides a function module to the accounting ness. They can also determine the best possible compensation capabilities of mySAP ERP. The accrual engine needs LTI data strategy revisions, quickly and accurately. to compute provisions for awards. • The bank SAP has developed a new job pricing tool for compensation The solution provides an outbound interface for LTI granting specialists. With this tool they can: and participation data and an inbound interface for exercising • Create and maintain an unlimited number of salary survey data for data exchange with banks and brokers. These inter- providers faces are XML interfaces and are compliant to the standards of • Import and store salary survey data from any number of the HR-XML Consortium. providers, update data as needed, and maintain a history of • Budgeting previous market data Allocated and spent budgets can be converted as a conse- • Age salary survey market data quence of a stock split. Therefore, budgeting needs to use an • Match internal benchmark jobs to survey jobs from multiple LTI function module to convert budgets from one stock unit salary survey providers into another. • Apply a weighting factor against various matched jobs from • SAP Business Intelligence (SAP BI) different providers SAP BI handles granting, exercising, and vesting data. You call • Establish market composite results for jobs and compare the appropriate extractors from SAP BI and adjust them to internal salaries against blended market data supported by the new data model. graphical tools • Compensation administration • Adjust internal salary structures based on market findings, LTI functions are closely connected to compensation admin- including performing regression analyses supported by istration. An important program interface between the two graphical tools functions is the activation process of the Compensation • Extract company compensation data to participate in salary Process Infotype (IT 0759). The LTI function provides a surveys function module as part of the activation. Compensation • Link to SAP Business Intelligence to run sophisticated administration uses LTI function modules to convert the analytics and reports number of awards from one stock unit to another. • Payroll Figure 6 shows the job pricing business process, including all the Payroll evaluates the LTI Exercising Infotype (IT 0762). You steps involved and supported by mySAP ERP HCM. define the wage types for the respective amounts and the payroll engine can calculate the appropriate tax. The tax calculation is delivered in the international payroll engine, along with specifics for German and U. S. regulations. • Total compensation statement The total compensation statement shows the number of granted awards and the granting date. This data is read from the LTI Grant Infotype (IT 0761). 12
  • 13. BUSINESS PROCESS OF MARKET PRICING OVERVIEW (GENERAL) JOB ANALYSIS SELECT SURVEY RECEIVE SURVEY PROVIDER DATA SUBMISSION • Create internal jobs • Organization decides FORM (ONLINE, DISK, and job descriptions which salary surveys EXCEL, ETC) FROM to participate in SURVEY PROVIDERS IMPORT DATA JOB MATCHING AGE DATA • Upload job catalog, • Match internal jobs • Age market data to descriptions, and to survey jobs evaluation date market data to the system WEIGHT DATA COMPILE MARKET DATA ANALYSIS DATA • Weight market data • Create market • Evaluate and compare from different composite result for to current internal providers internal jobs from compensation matched survey jobs DETERMINE MARKET PHILOSOPHY IDENTIFY TARGETS GAP • Identify which jobs or • Determine or create • Create market targets job families require compensation for certain jobs or job adjustments philosophy families ADJUST SALARY ACTIVATE STRUCTURE ADJUSTMENT Figure 7: Comparison of Market Composite Result to Employees’ Payment • Create proposal for • Adjust the current salary structure salary structure with adjustments to “lead” the new structure or “lag” the market Figure 6: Overview of the Salary Benchmarking Business Process Once you have imported market data from the survey providers, you create market composite results. This infor- mation is stored in the new composite Survey Result Infotype (IT 1271) for each internal benchmark job. You can then compare market pay and your company pay for employees, positions, or jobs. You can create multiple composite results, so you can compare different market movement assumptions, provider weightings, and market data aging factors. 13
  • 14. AT-A-GLANCE ENTERPRISE COMPENSATION MANAGEMENT INFOTYPES AND ARCHITECTURE OVERVIEW You can access and maintain all Infotypes using the mySAP ERP HCM master data maintenance function. The solution includes the following infotypes for enterprise compensation management: • Compensation Programs (IT 0758) • Compensation Process (IT 0759) • Compensation Eligibility Override (IT 0760) • LTI Grant (IT 0761) • LTI Exercising (IT 0762) • LTI Participant Data (IT 0763) • Composite Survey Result (IT 1271) HR COMPENSATION EMPLOYEE MANAGER HR EXECUTIVE USERS ADMINISTRATOR SPECIALIST MASTER DATA BUDGETING JOB PRICING ESS USER MSS USER USER FRONT END INTERFACE INTERFACE INTERFACE LTI COMPENSATION BUDGETING JOB PRICING TOTAL ADMINISTRATION ADMINISTRATION COMPEN- EXERCISING SATION BACK END (IT0762) COMPENSA- SURVEY STATEMENT GRANTING TION PROCESS RESULTS (IT0761) (IT0759) BUDGETS (IT1271) PAY DATA SALARY DATABASE (IT0008 ETC.) STRUCTURES PERSONNEL MBO/ BW OTHER SAP PAYROLL ACCRUAL TREASURY COST APPRAISALS REPORTING COMPONENTS PLANNING BANK/ SURVEY EXTERNAL BROKER PROVIDERS COMPONENTS Figure 8: Overview of the Enterprise Compensation Management Architecture Including User Roles and User Interfaces 14
  • 15. SAP EMPLOYEE SELF- SERVICE AND THE TOTAL COMPLETE REPORTING COMPENSATION STATEMENT CAPABILITIES Using SAP Employee Self-Service, employees can always see a mySAP ERP HCM provides basic reporting capabilities. You can total compensation statement – the compensation they view and format tabular report results in the SAP list viewer received from their employer during certain time periods. tool. Using this tool you can: This statement, which can be customized, can be in multiple • Filter data formats, including Smart Forms and Adobe Acrobat Reader. • Total and subtotal data The statement can be printed individually or in bulk. • Sort data • Display data in Microsoft Excel and Crystal Reports The total compensation statement can include sales commis- • Define your own report layouts sion from SAP Commission and Incentive Management. It lists • Export data to Microsoft Word and Microsoft Excel data from four different areas within mySAP ERP HCM: • Payroll, including salary and bonus By implementing SAP Business Intelligence, you can execute • Benefits, including health plans, insurance plans, savings more sophisticated reports that go far beyond these functions. plans, flexible spending accounts, miscellaneous plans, stock SAP Business Intelligence contains a special enterprise compen- purchase plans, and credit plans sation management InfoCube (a type of SAP dataset) and • Other compensation, including LTIs queries that you can use to analyze all of your compensation • Personnel development, including additional education and data in detail. SAP Business Intelligence delivers more than training and individual development plans 30 standard queries with enterprise compensation management content. 15
  • 16. THE ADVANTAGES OF INTEGRATED ENTERPRISE COMPENSATION MANAGEMENT mySAP ERP offers an integrated solution for enterprise com- pensation management that delivers the following advantages: • Broad, real-time, and reliable information availability and exchange for decision making • Strategic personnel management and support for your overall enterprise strategy • Integration with all vital SAP components inside and outside mySAP ERP, as well as with third-party interfaces, ensuring communication with all parties involved and full support of the entire enterprise compensation management process • Improved productivity through user-centric applications that ensure HR professionals and managers have the right tools and an easy-to-use interface • Unlimited reporting capabilities through standard reports, extensive SAP Business Intelligence reports, and ad hoc query capabilities so you can take immediate action when required • Flexible customizing to ensure that you can set up all possible compensation plans according to your specific needs And the advantages just keep coming. To help you cope with change, SAP continuously improves mySAP ERP. Enhancements to the solution’s enterprise compensation management features and functions will ensure an even greater ability for your com- pany to implement a flexible strategic compensation policy, supported by a comprehensive compensation management solution that helps you achieve your goals. To learn more about mySAP ERP, visit the SAP Web site at www.sap.com/solutions/erp 16
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