Incentive compensation administration survival kit: Top tips from two seasoned ICM veterans

December 10, 2018

By: Lori Denman & Barbara Weigel, OpenSymmetry

Incentive compensation administration can be challenging. Coming up with incentive compensation plans for universal approval? Hard. Communicating them? Hard. Helping payees understand them? Also hard.

An incentive compensation administrator can live in the space between receiving information and the deadline of payroll – and that window of time never seems like enough to process incentives.

Through these challenges, there are industry tips and best practices that can make incentive compensation administration an exciting and rewarding career. Here is a list of top tips for a brand new incentive compensation administrator from over a decade of experience:

  1. Have a max of three components per plan. This seems like it’s a suggestion or a rule of thumb, but this is one of the best rules in the book. As plans are adjusted for changing market conditions or salesforce needs, it’s easy for plans to get complicated, especially when there are already many different product lines and seasonal factors to consider. However, if sales reps don’t understand the incentive compensation plan, even the best plan will be ineffective. Keep it as simple as possible to avoid productivity lost in error adjustments, payout disputes, and shadow accounting.
  2. Make your upstream partners your best friends. Meeting a timeline to pay out incentive compensation is a challenge, because often, incentive comp admins are dependent on upstream partners such as financial analysts or IT partners for financial or order data as an example. Make your upstream partners your allies and drive home the importance of getting your data in a timely manner so you are not scrambling to get all the pieces you need a couple days before incentives are due to payroll.
  3. Get year-end information from senior leaders early. Year-end plan changes are a topic of discussion usually the beginning of Q4.  For an incentive compensation administrator this can create a tight timeline.   Keep in close communication with senior leaders about the direction of overall compensation and incentive compensation for the sales team in the upcoming year to avoid working through the holidays to be ready for the January payout.
  4. Know your data – understand your expected results. Knowing your data is just as important as knowing the plan. Assuming that the data you receive is fine could cost hours of error adjustments later down the line. Aim instead to know the end-to-end process backwards and forwards so that you can validate the expected results and check for errors quickly and efficiently to get payouts correct the first time.
  5. Don’t compare your compensation to others’. As an incentive compensation admin, you will have access to the salaries of many people in your company, some of whom will be paid more than you. This comes with the territory, but often comes as a shock to many. If that will leave you resentful or discouraged, this field is not for you. Know yourself, and don’t take it personally.

So how do you know if incentive compensation administration is for you? Just keep at it. It may be difficult at first, but there are thrills to this career track as well. As you model incentive compensation plans and execute them, it’s exciting to see your plans motivate and challenge those in your company to rise up and do more than they had before.

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