The pros and cons of using an SAP Incentive Compensation module

In this expert Q&A , learn about the advantages and disadvantages of using the Incentive Compensation module from SAP.

What are the advantages and disadvantages of using the Incentive Compensation module from SAP?

Also, what are the average timelines for implementing an SAP project? What is the average cost of implementing...

and deploying this solution? How effective is the software support services offered by SAP?

Whether the features listed are advantages or disadvantages depend upon from whose perspective it is viewed. Advantages to managers may be disadvantages to central compensation and vice versa. But I'll offer the following advice for consideration.

Using SAP's Incentive Compensation module provides integration of data. When used in conjunction with SAP's Personnel Cost Planning module, SAP can generate budget values using the payroll data and create cost planning scenarios aligned with existing OM structure and workflow. Additionally, guidelines may suggest default amounts and/or percentages. Finally, at the end of the process, updates to applicable infotypes, such as basic pay or one-time payments, may be created.

MSS updates, such as payments in a currency other than that to which the employee is assigned, are not the same as direct master data updates, which work within the local currency. Note that SAP provides OSS Notes and configuration settings (table T77S0) switch, which are supposed to override this.

Advantages and disadvantages depend on the complexity of compensation rules, existing compensation packages, or access to data (i.e., custom portal and ability to manipulate outcomes, such as change in increases without direct connection to ratings). Managers must complete their ratings before recommended default pay increases may be suggested. This may differ from current business practice, which allows the rating and the pay increase to be entered simultaneously and iteratively.

While promotions and merit may be addressed in the same budget, SAP does not provide full integration regarding promotions -- no actions Infotype update is included and needs to be handled outside the budget process, although the basic pay or lump sum payments may be updated within the process.

Timelines and costs can vary greatly and are impacted, in part, by these factors, which you can greatly control:

  • Whether the processes and procedures standardized and well documented
  • The complexity of compensation packages
  • The level of custom development
  • The level of testing (obviously, the more testing performed upfront, the better the product rolled out)

Dig Deeper on SAP HCM

Start the conversation

Send me notifications when other members comment.

Please create a username to comment.