Automating Eligibility Within an ICM Application
As a Compensation Administrator, you see changes all the time related to whether or not payees are eligible for incentive compensation throughout your organization’s compensation cycle. Since you know that these incidences occur on a frequent basis, it is important that your ICM application provides a means of automating each payee’s eligibility for each compensation period.
This article provides useful guidance on how to address this business need in such a way as to allow your ICM application to automate this capability.
First, you need to assemble the various business rules which dictate eligibility of a payee with regards to a compensation plan element within their assigned compensation plan. Typically, these rules are spelled out in the respective compensation plan document for each payee. After all, you are not the only individual within your organization who needs this information. Payees, managers, HR, and perhaps others also have the same need to know as you do.
By compiling a complete list of eligibility business rules, it is then possible to categorize each of them into common themes. The purpose of these themes is to determine specific criteria which must be met in order to be eligible for a compensation plan element. Or conversely, to determine specific criteria which mandate that a payee is not eligible for a particular compensation plan element.
Armed with this criteria, your ICM application should have been developed so that the different criteria matches with a data value to allow you to set up eligibility within the application.
For example, your organization may have a business rule which states that a payee must be actively employed within your company on the last day of the month in order to be eligible to receive compensation calculated on their assigned compensation plan. For your ICM application to leverage this employment status, this data must have a respective home within your application.
Continuing with the use of this employment status as an example, this data must either be fed into your ICM application from your company’s HR system, or it must be manually entered by you in the appropriate data table. Once entered into the ICM application, logic then processes the employment status for each compensation period to indicate the payee’s eligibility status in each period.
As a result, each payee in each compensation period has their respective eligibility status calculated by the application. And, you should have the ability to verify that the correct value is associated with each payee for each compensation period.
Because employment status, for instance, changes over time, your ICM application needs to maintain “date effectivity” of this status over time. A payee becomes eligible and remains eligible over a span of multiple periods. Then, an event arises which makes that payee ineligible for a span of periods.
At the time of that event, the status of this data item is changed to a value which equates to being ineligible. For employment status, that value may have changed from Active to Inactive. There may be many different values for this data element. The important item to note here is that every possible value has associated logic to derive the correct eligibility result, and you have the capability to verify the calculated result.
The effective date provides start dates and end dates for each status based on the duration of the event mentioned above. It is the use of these start dates and end dates which allows the ICM application to maintain a complete history of eligibility over time and across all compensation periods.
Because data values change over time, it is also imperative that your ICM application locks your calculated compensation results once they are approved by the appropriate Sales Management channels. Locking, in conjunction with date effectivity, ensures that eligibility status is always maintained accurately, never changes historically, and remains auditable over time.
While your ICM application has most likely automated payee eligibility, your responsibility as a Compensation Administrator is to verify that eligibility status is correct for each payee in each compensation period. Refer to your ICM application documentation to study how to accurately maintain the data which drives eligibility.
Article written by: Robert Jellison