If lump sum adjustments are enabled for the Base tab, a Lump Sum component appears on the Base tab in the compensation plan. The location and the name of the Lump Sum column is configured by the administrator when the base template is created. A lump sum is a one-time payment that does not affect the employee's salary/rate. However, it does count towards the budget for base adjustments.
Tooltips for Merit Increase and Lump Sum Components
Tooltips for the Merit Increase and Lump Sum components indicate the automatic allocation shift from Merit Increase to Lump Sum. The tooltips are only visible if the compensation template is configured to allow for automatic lump sum allocation for salary range overages.
Merit Increase Tooltip
The Merit Increase tooltip indicates that salary range overage amounts are allocated to the Lump Sum component. Note: The tooltip only displays help text if Recommendations are not available.
When users click into the Merit Increase component field, compensation plans display the original allocated merit increase amount prior to automatic lump sum adjustment and the Lump Sum component reflects "0." When users click out of the Merit Increase component field, automatic lump sum adjustment for salary range overages are calculated and reflected in the Merit Increase and Lump Sum components.
Considerations
The following considerations assume that the automatic lump sum adjustment for salary range overages functionality is enabled:
-
Once automatic lump sum adjustment has occurred and the Merit Increase component is not being edited, the Merit Increase and Lump Sum components reflect the amounts calculated by the automatic lump sum adjustment, as currently implemented.
- When editing the allocation amount in the Merit Increase component, the merit increase reflects the original allocated merit increase amount prior to the automatic lump sum adjustment (i.e., <Merit Increase> + <Lump Sum>). Further, the lump sum amount reflects "0."
Use Cases
The following use cases assume that the base template in the task includes Merit Increase and Lump Sum components and that the Automatic Lump Sum allocation for Salary Range overages option is enabled.
| Position | Wage Type | Minimum Salary/Rate | Maximum Salary/Rate |
|---|---|---|---|
| Sr. Software Engineer | Annual | $90,000 | $115,000 |
| Employee | Wage Type | Labor Hours | Position | Current Salary/Rate |
|---|---|---|---|---|
| Jonathan Stanley | Annual | N/A | Sr. Software Engineer | $115,000 |
Use Case 1: Merit Increase Component - Read-Only Mode
Default Merit Increase adjustment guideline at 5% of base.
Action
Compensation manager creates a new compensation plan.
Results
- Jonathan Stanley reflects:
- Merit Increase: $0.00/0.0%
- New Salary: $115,000.00
- Lump Sum: $5,750.00
- Salary Range overage: $5,750.00/5.0%
Use Case 2: Merit Increase Component - Edit Mode
Default Merit Increase adjustment guideline at 5% of base.
Action
- Compensation manager creates a new compensation plan.
- Compensation manager opens Jonathan Stanley's Merit Increase component to edit the allocation amount.
Results
- Jonathan Stanley reflects:
- Merit Increase: $5,750.00/5.0%
- New Salary: $115,000.00
- Lump Sum: $0.00
Use Case 3: Merit Increase Component - Edit and Move
Default Merit Increase adjustment guideline at 5% of base.
Action
- Compensation manager creates a new compensation plan.
- Compensation manager opens Jonathan Stanley's Merit Increase component to edit the allocation amount.
- Compensation manager edits Jonathan Stanley's merit increase from $5,750.00 to $3,450.00.
- Compensation manager clicks outside Jonathan Stanley's Merit Increase component on the compensation plan.
Results
- Jonathan Stanley reflects:
- Merit Increase: $0.00/0.0%
- New Salary: $115,000.00
- Lump Sum: $3,450.00
- Salary Range overage: $3,450.00/3.0%
Lump Sum Tooltip
The Lump Sum tooltip indicates the salary range overage amount that has been shifted from the Merit Increase component. In addition to the currency, the following is included in the tooltip depending on if the wage type is annual or hourly:
- Annual Wage Type - The Salary Range overage field displays the amount shifted from the Merit Increase component that caused the employee to exceed the salary range. The Salary Range overage field also shows the percentage of the overage amount against the employee's current salary. The values included in the field display as <Overage Amount> <Currency> / <Overage as Percentage of Base>. Note: The Salary Range overage field displays "0.00 <CURRENCY> / 0.0%" if the employee is still within their salary range or if the employee exceeds the salary range but no Merit Increase amount has been allocated.
- Hourly Wage Type - The Rate Range overage displays the money per-hour rate amount for which the employee is the salary range. The values included in the field display as <Overage Amount> <Currency> / <Overage as Percentage of Base>. Note: If the hourly salary range is only specified by an annualized amount, the rate range overage is calculated using the following formula: <Max Annual Salary>/<Labor Hours>.
New Salary Exceeds Salary Range
If an employee's new salary is over their salary range, the overage amount is deducted from the merit increase allocation and appears in the Lump Sum component allocation. For annual wage type employees, the overage amount is moved from Merit Increase to display in the Lump Sum component. For hourly wage type employees, the overage amount is calculated by taking the overage expressed in money per hour multiplied by the employee's labor hours. This annualized overage amount displays in the Lump Sum component.
Prorated Merit Increase
If Merit Increase is a prorated component, then when editing the merit increase allocation, the Merit Increase Recommendations pop-up displays help text indicating the automatic allocation. See Compensation Plan - Proration - Base.
Considerations
The following considerations assume that the automatic lump sum adjustment for salary range overages functionality is enabled:
- The calculated merit increase proration breakdown is only visible within the compensation statement when using the proration breakdown tag.
- When the user opens the Merit Increase Recommendations pop-up, the total increase amount reflects the total allocated merit increase amount prior to the automatic lump sum adjustment. Each of the prorated line items show the previous allocated line item amount prior to the automatic lump sum adjustment. That is, the system remembers what was allocated to each prorated line item prior to the automatic lump sum adjustment.
- When the user is not viewing the Merit Increase Recommendations pop-up, the compensation plan reflects the actual Merit Increase and Lump Sum components after the automatic lump sum adjustment.
Use Cases
The following use cases assume that the Automatic Lump Sum allocation for Salary Range overages option is enabled.
| Position | Wage Type | Minimum Salary/Rate | Maximum Salary/Rate |
|---|---|---|---|
| Software Engineer | Annual | $75,000 | $90,000 |
| Sr. Software Engineer | Annual | $90,000 | $115,000 |
| Employee | Wage Type | Labor Hours | Position | Current Salary/Rate |
|---|---|---|---|---|
| Melissa Powers | Annual | N/A | Sr. Software Engineer | $100,000 |
Use Case 1: Proration - Simple
Assumptions
- Melissa Powers' positions from 1/1/2011 - 12/31/2011:
- Software Engineer: 1/1/2011 - 5/20/2011 (140 days, 38.4%)
- Sr. Software Engineer: 5/21/2011 - 12/31/2011 (225 days, 61.6%)
- Compensation period is set to 1/1/2011 - 12/31/2011.
- Merit increase is prorated by the length of time in the position.
- Default Merit Increase adjustment guideline at 20% of base.
Action
- Compensation manager creates a new compensation plan.
- Melissa Powers shows $15,000 in the Merit Increase component and $5,000 in the Lump Sum component.
- Compensation manager edits the Merit Increase component for Melissa Powers.
Results
- Merit Increase proration pop-up displays the following:
- First prorated period
- Position: Software Engineer
- Proration: 38.4%
- Minimum: $7,671.23
- Maximum $7,671.23
- Increase: $7,671.23/7.7%
- Second prorated period
- Position: Sr. Software Engineer
- Proration: 61.6%
- Minimum: $12,328.77
- Maximum: $12,328.77
- Increase: $12,328.77/12.3%
- Total Increase: $20,000.00
- The following are compensation tags for Melissa Powers:
- Merit Increase Proration Breakdown:
| Date | Number of Days | Amount |
|---|---|---|
| 1/1/2011 | 140 | $7,671.23 |
| 5/21/2011 | 225 | $7,328.77 |
| Total | $15,000.00 |
- Merit Increase: $15,000.00
- Lump Sum: $5,000.00
Use Case 2: Decreasing Component After Salary Range Overage - Proration
Assumptions
- Melissa Powers' positions from 1/1/2011 - 12/31/2011:
- Software Engineer: 1/1/2011 - 5/20/2011 (140 days, 38.4%)
- Sr. Software Engineer: 5/21/2011 - 12/31/2011 (225 days, 61.6%)
- Compensation period is set to 1/1/2011 - 12/31/2011.
- Merit Increase is prorated by the length of time in the position.
- Cost of Living Adjustment is a base component included in the base salary.
- Default merit increase adjustment guideline at 20% of base.
- Default Cost of Living Adjustment adjustment guideline is $1,000.00.
Action
- Compensation manager creates a new compensation plan.
- Melissa Powers shows $14,000 in the Merit Increase component and $6,000 in the Lump Sum component.
- Merit Increase proration pop-up displays the following:
- First prorated period
- Position: Software Engineer
- Proration: 38.4%
- Minimum: $7,671.23
- Maximum: $7,671.23
- Increase: $7,671.23 / 7.7%
- First prorated period
- Second prorated period
- Position: Sr. Software Engineer
- Proration: 61.6%
- Minimum: $12,328.77
- Maximum: $12,328.77
- Increase: $12,328.77 / 12.3%
- Total Increase: $20,000.00
- Compensation manager allocates $500.00 to Melissa Powers for Cost of Living Adjustment adjustment guideline.
Results
- Melissa Powers is $500.00 less over her salary range than previously ($1,000.00 - $500.00).
- Melissa Powers shows $14,500 in the Merit Increase component and $5,500 in the Lump Sum component.
- Merit Increase proration pop-up displays the following:
- First prorated period
- Position: Software Engineer
- Proration: 38.4%
- Minimum: $7,671.23
- Maximum: $7,671.23
- Increase: $7,671.23/7.7%
- Second prorated period
- Position: Sr. Software Engineer
- Pro-ration: 61.6%
- Minimum: $12,328.77
- Maximum: $12,328.77
- Increase: $12,328.77/12.3%
- Total Increase: $20,000.00
- First prorated period
- The following are compensation tags for Melissa Powers:
- Merit Increase Proration Breakdown:
| Date | Number of Days | Amount |
|---|---|---|
| 1/1/2011 | 140 | $7,671.23 |
| 5/21/2011 | 225 | $6,828.77 |
| Total | $14,500.00 |
- Merit Increase: $14,500.00
- Lump Sum: $5,500.00
Automatic Calculation of Salary Range Overages
As adjustments are made to the Merit Increase component on a compensation plan, the system calculates whether or not the amount that is entered causes the new salary to exceed the employee's salary range. If the salary range is exceeded, the overage amount is automatically allocated to the Lump Sum component while Merit Increase retains the amount (if any) that brings the employee to the maximum amount of the salary range.
The following sections provide explanations of possible scenarios that may occur when the compensation template is configured to allow for automatic lump sum allocation for salary range overages.
Recommended Base Allocations Exceed Salary Range
- If an employee's recommended base allocations put them over the salary range, the overage amount is taken from the merit increase allocation and added to the lump sum allocation. This occurs when the plan opens to allow compensation managers to see the lump sum overage amount by default. Note: Only the Merit Increase component is used to reduce the new salary into a range. This means that even if the entire merit increase allocated amount has been shifted to the Lump Sum component, it is possible for the employee to be over the salary range.
- If an employee's current salary is already over the salary range, their entire merit increase allocation is shifted to the Lump Sum component.
Merit Increase Component Exceeds Salary Range
When a compensation manager allocates an employee's Merit Increase component and clicks outside of the component text input box or presses Enter on their keyboard, the system automatically calculates whether or not the amount that is entered causes the employee to exceed the salary range.
- If the employee exceeds the salary range, the overage amount is applied to the Lump Sum component. The Merit Increase component shows any remaining amount that brings the employee to the maximum amount in the salary range.
- If the employee is within the salary range, the Merit Increase component keeps the amount entered by the compensation manager.
Base Component Amount Exceeds Salary Range
When a compensation manager allocates an employee's base component that is selected to be included in the base salary, and then clicks outside of the component text input box or presses Enter on their keyboard, the system automatically calculates whether or not the amount that is entered causes the employee to exceed the salary range.
- If the employee exceeds the salary range and the lump sum has not been calculated (i.e., Lump Sum Amount = 0), the overage amount is removed from the employee's merit increase allocation and shifted to the Lump Sum component.
- If the overage amount is greater than the merit increase allocation, the entire merit increase allocation is shifted to the Lump Sum component. The remaining overage still applies to the employee's new salary. This also applies if there is a zero amount allocated to the Merit Increase.
- If the employee exceeds the salary range and the automatic lump sum allocation has previously occurred (i.e., the lump sum amount is greater than 0), the Lump Sum and Merit Increase components are recalculated from the start. That is, Merit Increase is treated as a new amount, and automatic lump sum allocation is calculated from the amount entered. Note: This may cause the merit increase allocation amount to increase and the lump sum amount to decrease.
- If the employee is within the salary range, then no amount is shifted.
Promotion
If a promotion is included for an employee, the salary range used to calculate automatic lump sum allocation is the new salary range based upon the promotion. Adding or removing a promotion recalculates and adjusts the merit increase and lump sum allocations appropriately upon closing the Promotion pop-up. See the Promote Employee section below for more information about promoting employees.
Prorated Merit Increase Component
If the Merit Increase component has been prorated and the compensation manager must provide allocations for multiple prorated periods in the Prorated Merit Increase Recommendations pop-up, then the total increase applied must also adhere to the automatic lump sum allocation if the increase causes the employee to exceed the salary range.
- The partial overage amount that is deducted from each prorated period is dependent upon the timeline of the prorated periods. The overage amount is first deducted from the last applicable prorated period. That is, the amount is deducted from the last period to the first (latest to earliest).
- For decreases in other base components included in the base salary that cause the overage amount to decrease, the merit increase amount added back to the prorated periods only adds the merit increase amount to the last applicable prorated period.
MERIT.INCREASE Tag
Any conditions or formulas that use the MERIT.INCREASE tag will pull the value of the Merit Increase component once the automatic lump sum allocation has taken place. That is, the MERIT.INCREASE tag reflects the actual merit increase amount after the overage amount is applied to the Lump Sum component.
Adjustment Guideline Considerations
- If an adjustment guideline references Merit Increase, the guideline is set to dynamically update its value in the task, and automatic lump sum allocation is enabled, then the adjustment guideline component resolves upon creating the compensation plan for the first time. However, the adjustment guideline component does not dynamically update in the task.
- Merit increase allocations, regardless of whether or not they are part of the Merit Increase component or shifted to the Lump Sum component, must follow the rules of the adjustment guideline. That is, the original, total merit increase allocation must adhere to that employees' adjustment guideline.
General Considerations
- The compensation manager cannot edit the Lump Sum component if the compensation template is configured to allow for automatic lump sum allocation for salary range overages.
- The Merit Increase component always utilizes the automatic Lump Sum allocation if the feature is enabled, regardless of whether or not the field is discretionary or non-discretionary.
- When adjusting the Merit Increase component, the Lump Sum component is recalculated at that point. That is, the Lump Sum component does not track its previous value; the value is recalculated based on the Merit Increase amount.
- Only the Merit Increase component is used to shift salary range overages to the Lump Sum component, regardless of whether or not there are other components included in the base salary.