World is a big village.
This is one of the most interesting pieces of ECM that I wanted to explore. Global plans are interesting since they accentuate minor process flaws. The global plans bring forth differences in languages, currencies, culture, accounting practices, etc… In the course of these chapters you might see some of them play out in the plans.
14 Managing Global Plans
Managing global plans is very challenging to say the least. We will take an example of an annual global bonus plan and illustrate the process as we have do with other chapters. The traditional process has been very cumbersome and slow. Depending on the plan requirements, the corporate HQ sends out a communication to gather eligible employees from around the world. This takes a lot of time since local HR needs to collect the data and make sure everyone who is eligible are considered. Then all the information flows back to the HQ. The budget is adjusted to make sure that the overall population is accounted for. By the time information flows back, eligible employees might have resigned or transferred. These movements can’t be tracked in real time and accounted for. The guidelines that are setup by the corporate are very difficult, if not impossible, to enforce due to the lack of any feedback process. Once the awards have been given, the HQ is totally dependent on the information they receive from the different countries. The countries in turn have a very difficult time to communicate real-time changes related to currency fluctuation. The initial amount allocated to a country might no longer be sufficient since the currency exchange changes might leave them with very little money.
Using ECM to manage global plans can overcome many of the issues that the traditional processes face. The implementation of any global process requires a lot of due diligence upfront. The more things get cleared and streamlined during the requirements gathering phase, the better will be the outcome of the implementation.
ECM provides the functionality to define one reference currency. This currency provides consistency for budgeting processes and ensures that allocation and awards tally up.
Figure 14.1 Reference currency setup
We will define the monetary global bonus plan that is ready to be allocated. Though it looks like a table, only one entry is allowed.
Figure 14.2 Setup budget type for global bonus
The setup of currency conversion is not the primary responsibility of the compensation team. The finance team is the one who would be more appropriate to do this work. There are vendors that provide currency exchange rates on a daily basis and that might be uploaded seamlessly into SAP. The requirement of ECM might not be as stringent as that of the finance department and most cases, a monthly rate might suffice. The table that needs to be kept up-to-date is the TCURR table that store currency conversion information.
Figure 14.3 Currency Exchange table
We can continue to use the existing budget period but now it might be more important to use the key date to ensure that the currency conversion happens on a fixed date so that it’s more predictable.
Figure 14.4 Setup budget periods
We will setup a global compensation area Z1. An employee can belong to multiple compensation areas. Hence for the local plans the employee should be in the primary compensation area.
Figure 14.5 Define compensation area for global compensation
We will not use the compensation area feature for global compensation.
Figure 14.6 Compensation area feature
We will create a global bonus plan with it being in the category of regular bonus (infotype 0015).
Figure 14.7 Setup global bonus plan
We will create a separate compensation review for global compensation plans. Currently we only have a single global bonus plan.
Figure 14.8 Setup compensation review for global plans
We will setup the compensation review item for the global bonus plan and global compensation review.
Figure 14.9 Setup compensation review item for global bonus plan
The compensation review item attributes for the global bonus plan will use a default effective date using the fixed date for March 1. Effective date denotes the date when the award will be given. Though we can use BAdI HRECM00_EFFDATE to have different effective dates setup based on various country requirements. The eligibility dates will we pretty standard but we can accomodate specific requirements at the eligibility rules.
The proposed guidelines will be proposed based on the fixed date that was the last day of the program, We could have used the program period date and it would have done the same. We would have used the effective date, then the proposed guideline would have aligned with the default effective date.
The calculation base key date defines the annual salary of the employee when the calculation is made for the guidelines. If the guideline is 20% of annual salary, the system picks the date of the calculation base key date and finds the salary on this date and calculates the annaul salary based on ASAL wage type.
If the award is proposed in other currency, then based on this date the currency will be converted into local currency and distributed to the employee.
Figure 14.10 Compensation review item attributes
It’s important to note here that the budget check and guideline check are standard ECM but the activity check is based on the BAdI HRECM00_CONSISTENCY
14.2.1 Local variant setup
We have already defined 2 eligibility groupings i.e. Country heads (COHE) and others (OTHS). We will create the compensation eligibility grouping based on the jobs and assign them to the eligibility grouping COHE or OTHS.
Figure 14.11 Job based eligibility groupings
We will create an eligiblity variant for people eligible for global compensation. Currently only the COHE eligiblity grouping is eligible. There are no other micro eligibility rules.
Figure 14.12 Compensation eligibility rule
We will make sure that all the others are marked as ‘Not Eligible’.
Figure 14.13 Employees other than Country Heads are not eligible
After eligibility, we will setup guidelines. We will create the global guideline variant for global bonus.
Figure 14.14 Guideline variant
We have defined guideline grouping for the country heads.
Figure 14.15 Guideline grouping
Currently we have kept it extremely simple that anyone who is in the global compensation area Z1 has the same guideline grouping COHE.
Figure 14.16 Guideline grouping feature
The guideline for every eligible employee is that the default will be 20% with the range from 10% to 30% of their calculation base. There is no need to define the guideline matrix.
Figure 14.17 Guideline details
The global bonus plan is assigned the eligibility variant and guidelines variant as designed above.
Figure 14.18 Compensation plan assignment
Payroll is very country specific. We will first chose a country and for the compensation area and plan combination of Z1/ GBLB, we will assign the payroll data accordingly. For US, the values assigned are shown in Figure 14.19
For
Germany, this payroll data will be different for compensation area/ plan combination of Z1/GBLB as shown in Figure
14.
20We will need to do this for all the countries that are the part of global bonus compensation plan.
For compensation area Z1, we need to define the first compensation program grouping and second compensation program grouping. We have defined the compensation program grouping similar to what we have done for other plans previously. The first compensation program grouping is ALL as shown in Figure 14.21
The feature CP1GP to define the first compensation program grouping is shown in Figure 14.22
The second compensation program grouping is ALL as shown below in Figure 14.23.
The feature CP2GP to define the first compensation program grouping is shown in Figure 14.24
The compensation program for the combination of compensation area/ 1st program grouping/ 2nd program grouping of Z1/ ALL/ ALL includes global bonus plan.
Figure 14.25 Global compensation program
For all the employees who are belong to the global compensation program, we need to create the record with compensation area/ 1st program grouping/ 2nd program grouping combination of Z1/ ALL/ ALL. The Figure 14.26 shows a Japanese country head included in the global compensation.
The Figure 14.27
In the same line, there will be employees (country heads) from all over the world, who will have a similar infotype 0758 record, making them eligible for global compensation.
<<executing the global compensation>
Setting up the budget
We will setup the budget for the top three levels of the organization. We will use the budget type for global bonus GBLB.
Figure 14.28 Budget structure for global compensation
We will add the budget amounts. We can add it in local currency. The distributable column will show the amount in reference currency.
Figure 14.29 Allocate budget amount in local currency
Currency conversion takes place based on the exchange rates stored in the currency table TCURR for the date that is defined as the key date in the budget period assigned.
Figure 14.30 Currency exchange table
Once all the allocation is complete, we can release the budget and the award process can begin.
Figure 14.31 Release the budget structure
Starting the compensation process
The manager sees all of his subordinates from all over the globe. In our case the manager is the chairperson of the company. There is a refresh button on the right hand bottom of the table to ensure that the latest data is displayed. The manager selects the compensation review cycle of global compensation.
Figure 14.32 Manager with global subordinates
The manager selects the entire eligible employee to award them. The screen shown in Figure 14.33 is kind of awesome due to that fact that it has people from all around the world shown with their annual salaries in different currencies and their names displayed in different languages. This is the power of an integrated system!! We can take a couple of moments to review this screen where all the things come together for any global company with a global compensation processes.
When we assigned higher than expected bonus of 40% as compared to the upper limit of 30% of the guideline, we will get warning messages. It is important to note here that we have effective date of 3/1/2008 but this can be changed on the screen itself.
Figure 14.34 Apply percentage award
The manager reviews the awards in multiple currencies and the budget in the reference currency. Once satisfied with the awards, the manager sends it for approval.
Figure 14.35 Sending for approval
The manager can see their awards in different currencies as seen in Figure 14.36
The awards can be viewed in USD.
Figure 14.37 Awards in USD
The status changes to ‘submitted’ after manager sends it.
Figure 14.38 Change to status on submission
The approver reviews all the rewards and approves or rejects them. The approver can see each award in employee’s currency or can see them all in one currency like USD.
Figure 14.39 Approval screen
The approver can ‘approve all’ the selected employee and move to the next step.
Figure 14.40 Completing the approval process
After the approval process is completed, we will now need a global compensation specialist to activate the awards for all the employees. Each one will now have an infotype 0015 created with their own relevant wage types.
14.5 Summary
In this chapter, we have covered creation of global compensation plans. We have also used multiple currencies. We have seen the configuration required on local basis and global basis. The advantage of global compensation management and local compensation management within the same integrated system is enormous. The challenge to leverage this system functionality is to standardize and streamline processes.
