From each according to his ability, to each according to his needs!- Karl Marx
6 Designing Eligibility
Defining and configuring eligibility is one of the core requirements of any compensation plan. If the eligibility is not defined, then everyone in that compensation area would be eligible. Though eligibility definition is optional, it is pretty much certain that you would need to define it. Actually it’s more helpful not be define eligibility for development and testing, than it’s in production environment. We have touched upon the macro eligibility with compensation programs. In this chapter we will focus more on micro eligibility. We will:
§ Explain the concepts of eligibility
Explore the different options available to define eligibility
In ECM, the key terms used in defining eligibility are eligibility variant, eligibility grouping and eligibility rule. The eligibility variant will be defined based on the combination of eligibility grouping and eligibility rule. We will discuss them in subsequent sections.
6.1 Defining Eligibility grouping
Compensation plan eligibility grouping is defined by the organizational attributes of an employee and answers the question: “Who is an eligible employee for which portion of the overall compensation plan?” For example, salaried employees might be eligible for annual bonus programs; executives might be eligible for stock option programs, and so on. These distinct compensation plan components result in different eligible populations, based on different employee types. This concept is illustrated in Figure 6.1 Who is Eligible for which Portions of the Compensation Plan?.
Eligibility groupings can be created using the standard method feature CELPG or the custom method BAdI HRECM00_ELIGP. Eligibility groupings are defined for each compensation area. These groupings should be carefully done and balanced. If there are too many, it will increase the maintenance, if there are too few, we might not be able to provide granularity for plan eligibility. We will describe each on of them in a little more details in the next section.
6.1.1 Using Feature CELGP
Before we create the feature, we need to setup the eligibility grouping that we plan to have.
§ Specify a short name and long description of the the eligibility grouping, as shown in Figure 6.2 Naming Eligibility Groupings
Once we have created the eligibility groupings, we need to find the way to define them. If our personnel structure (employee group and subgroup) matches this requirement, then we can use them to create the feature. As we plan to use the compensation area consistently, we can create the decision tree under the compensation area based on employee group and employee subgroup that groups the Executives, salaried and others.
Figure 6.3 Feature CELGP assignments
Note
Feature CELGP is very versatile. It has numerous parameters you can use to create flexible and exhaustive eligibility grouping assignments. Our example uses Employee Groups and Employee Subgroups, but you can also use pay structure or other elements, as shown in
The decision parameters shown in Figure 6.4 provide flexibility that can be very useful for developing global compensation programs. It contains Compensation Area, First Compensation Program Grouping, Second Compensation Program Grouping, pay structure, Job, and enterprise and personnel structure. It will assist you to create employee groupings that are granular enough to effectively manage eligibility for programs in your organization.
If the eligibility grouping of Executive, Salaried, Hourly and others has defined by pay grade, we can create the feature CELGP based on the pay structure parameters.
Figure 6.5 Feature CELGP using Pay Scales
The objective of reviewing the different options here is to highlight the fact that since each implementation is different, ECM provides the functionality to align it to each SAP HR implementation and each company policies. Once it’s been defined, one has to be very cautious in changing them and study the change impact.
6.1.2 BAdi HRECM00_ELIGP
You can use BAdI HRECM00_ELIGP instead of Feature CELGP if it is not sufficient to provide the required eligibility groupings. Like most of the BAdI in ECM, you can call the standard feature from within the BAdI. This allows for handling the exception in the BAdI but the rest of the decision making process can be setup using the feature.
The BAdI can be initialized as seen in Figure 6.6. It will need a good functional design along with an ABAP developer to deliver the requirements.
We should now be able to setup the core eligibility framework. We should have all the eligibility groups in place to begin the actual definition of eligibility rules.
6.2 Defining Eligibility rules
Eligibility rules can be defined for every eligibility group. An eligibility variant groups eligibility rules for each group that need to be assigned to a specific compensation plan. E.g. for the annual bonus plan, an executive has 2 months waiting period and a salaried employee has a 6 months waiting period. To accomplish this, we would create on eligibility variant “Annual Bonus”. We would define the eligibility rule for eligibility grouping of Executive with 2 months waiting period. Within the same eligibility variant, we will define the eligibility rule for eligibility grouping of Salaried with 6 months waiting period. An eligibility variant for “Annual Bonus” will then be assigned to the compensation plan “Annual Bonus Plan” to be effective.
The screen Figure 6.7 shows the different options available on the eligibility rule.
The eligibility rules can be defined based on:
§ Not eligible
You will be surprised to find the “Not Eligible” flag. This is very helpful to take care of the exceptions.
Minimum length of service:
You can setup a requirement for a minimum length of service. It might need at least 5 years of service before qualifying for a stock options plan. The calculation is based on formula already setup in IMG • Personnel Management • Personnel Administration • Evaluation Basis • Calculation of Employment period • Calculation Process • Define Calculation. This is integration with the Personnel administration. The calculation of service can be setup based on different criteria e.g. it can include or exclude sabbatical leaves.
Salary criteria:
There are 2 methods that are available. One is the salary range and other is compensation ratio (Compa-ratio). Depending on the preference, you can decide what you want to use.
You can define that only those employees are eligible who are getting paid between the midpoint of the salary range and maximum of the salary range. This will be defined by entering the minimum as 50% and maximum as 100%. The system calculates the salary percentage using the formula (current sal. - min. in range)/(max. in range - min. in range) * 100. In terms of compa-ratio, the calculation is employee’s salary divided by reference salary of the level. For e.g. if the reference salary of a level is 75,000 and the employee’s salary is 77,000, then the compa-ratio is 0.96 (72,000/ 75,000)
Minimum working hours of the employee:
The minimum working hours is compared to the number of working hours on IT 0007. If the minimum working hours is set to 32 hours/ week, then a part-time employee with 20 working hours would not be eligible for this plan.
Waiting period before an employee can become eligible:
We can define a waiting period before an employee can become eligible. We can specify it from the hire date or calculate it with the infotype 0041 Date types.
Employee’s performance (appraisal rule)
The Appraisal Rule is defined separately because it has a lot more variables. The appraisal rule can be created based on the old appraisal system or new Management by Objective (MBO) system. When we use the old appraisal system, it’s easily done by defining the Appraisal model e.g. Annual Performance Review.
Figure 6.8 Setting up Appraisal Rule
With Management by objective system, there are more choices. The evaluation can be for the overall rating for the template or for the second or third level element in the appraisal.
Figure 6.9 Setting up appraisal rule with MBO
Let’s review an example of annual bonus plan. We will create an annual bonus eligibility variant. This variant will have 3 eligibility rules, one for each grouping.
§ Executive
Salaried
Hourly
Executives are eligible for an annual bonus, after a one month waiting period after they are hired and if they have a performance rating of at least 4.
Figure 6.10 Executive Employee Eligibility Rule
Salaried employees are eligible after a two month waiting period and if they have a performance rating of at least 4.
Figure 6.11 Salaried Employee Eligibility Rule
Hourly employees are not eligible for the annual bonus.
Figure 6.12 Hourly Employee Eligibility Rule
The PERF appraisal rule is defined as in Figure 6.13 Performance Appraisal Rule
Eligibility rule periods
Eligibility rules are date sensitive. If necessary, you can change current parameters to different dates. That is, if salaried employees’ eligibility waiting period changes from two months to one month for the year 2009, you can change the period and apply the new rule.
Figure 6.14 Eligibility Rule Periods
Let’s now look at the concept and definition of eligibility variants.
In addition, there can be custom requirements on which micro eligibility is based.
6.3 Defining Eligibility Variants
Each compensation plan has an eligibility variant assigned to it. The eligibility variant is a combination of macro and micro eligibility, that is, it is a combination of eligibility groupings and eligibility rules.
Figure 6.15 Methods of defining Eligibility Variants
We can define as many eligibility variants as we want. It is not necessary that they all have to be used immediately. They can remain in the system and can be used subsequently.
Though the same eligibility variant to be reused for different plans, it is preferable to use one eligibility variant for one plan. This is to ensure that if we need to change the eligibility on one plan but not the other, we don’t have to make changes or accidentally apply the change to all the plans.
Eligibility Override
The standard eligibility definitions are expected to take care of most of the scenarios but like in any other things in life, there are exceptions. ECM provides with the simplest of the solution, it provides with an eligibility override at an employee level. There can be scenarios where an employee has been transferred from one country to another. In this cases, the employee might not fulfill all the country specific eligibility criteria but is still expected to be eligible for some of the compensation plans. This is accomplished by creating an infotype 0760 and specifying the plan.
The same logic can be reversed and if there are employee who come up as eligible but they need to be made ineligible, we can still use IT 0760.
6.4 Eligibility Rule Configuration
Follow this sequence of steps to configure eligibility rules beginning with the IMG:
Personnel Management • Enterprise
The screen shown in Figure 6.16 is the eligibility configuration.
Step 1: Define eligibility rule variants within a compensation area. Each compensation will have it’s own set of eligibility rules. We can’t copy eligibility variants across different compensation areas. We can translate the description in other languages if required. You can add more variants anytime you need them. They are created in line with the compensation plan that are going to be used for.
Figure 6.17 Define Eligibility Variants
Step 2: Define eligibility groupings
The eligible groups are defined here. There is a lot of work that needs to be done in the background to ensure that all the groups have been considered. You can only assign eligibility rules for each of the groups defined here. If there is anything that gets missed, it will be a lot of work to make changes. The eligibility groupings are used in all the eligibility variants. If it’s changed, it will impact all the variants.
Figure 6.18 Define Eligibility Groupings
The above process just defines the shell, the feature CELGP provides the actual employee population that will be assigned to eligibility grouping. It can be any combination of the decision fields available. But there are some caveats. If the eligibility doesn’t work as expected, you would need to check the compensation area feature and tweak some decision fields to avoid any overlap.
Figure 6.19 Define Eligibility Grouping Feature CELGP
Step 4: Define appraisal rule.
We will define the appraisal rule name first and then define the details of the appraisal rule. Again, we can define it based on the plan or create more readable titles.
Figure 6.20 Define Appraisal Rule
Figure 6.21 Setting up Appraisal Rule
The rule can be defined for the old appraisal system or new management by objective. The range of ratings can also be included as a part of the rule.
Step 6: Define eligibility rule.
Everything comes together when we are defining the eligibility rule. We will first choose a compensation area and the eligibility variant to which this rule belongs to. Then we will create the rule with the eligibility group along with the eligibility parameters.
Figure 6.22 Define Eligibility Rule
Figure 6.23 Executive Employee Eligibility Rule
Step 7: If eligibility can’t be define using standard configuration, activate the Business Add-In.
Figure 6.24 Eligibility Business Add-In
6.5 Summary
Designing eligibility rules is a challenging task. There are many options that are available that to implement standard eligibility but we can also use the BAdI. There is quite a bit of configuration that needs to be done to leverage the complete functionality.
We have covered the following topics:
Eligibility variant
Eligibility groupings
Eligibility rules
Appraisal rules
Eligibility BAdI
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