April 2018

Workday Advanced
Compensation
Perspectives from a future-minded partner
Contact
Nikki Spanos
The Paradigm Shift
Workday PoV Owner
[email protected]
In the past, trends in human resource (HR) system solutions
adopted a “best-of-breed” approach. On top of (or in addition
to) a core HR system (often an on-premise ERP) organizations
would purchase and manage separate systems for recruiting,
talent management, compensation, self-service and
some­times even payroll. This approach provided very robust
functionality at the domain level but became difficult to
maintain and expensive to sustain. A bifurcated user
experience and potential conflicts with upgrade schedules
and data routines triggered the need for data warehouse
solutions and sophisticated integration portals.

In the past, trends in human More recently, two major events triggered But what does this mean for critical,
resource (HR) system solutions a change in approach: the Cloud was born high-touch HR processes like advanced
adopted a “best-of- breed” and the power of data analytics became a compensation? Will companies have to
approach. Two major events
powerful, top-of-mind strategic business tool. sacrifice robust functionality or visibility into
triggered a change in approach:
• The Cloud was born.
These events caused the pendulum to swing their processes and data for unified systems
• Data analytics became and the new focus became...unified data. and increased efficiency? From our perspective,
a powerful, top-of-mind Core human capital management (HCM) the Cloud has evolved to a place where the
strategic business tool. and payroll systems established in the answer is an emphatic “no”.
Cloud began to resolve the problems of the
Workday has paid attention to the needs of
past and organizations started realizing
this particular domain and continues to invest
the benefits gained by moving from a
in its functionality. Below we will discuss
customization mindset to an efficient
advanced compensation best practices on
configuration paradigm. The Cloud brought
Workday and highlight some of our learnings
forward improvements in self-service, user
as a future-minded Workday deployment,
experience and built-in innovation with
operations and application management
scheduled, subscription-based updates.
services (AMS) partner.
Major cloud HCM players like Workday built
preferred partner ecosystems to fill domain
needs that their core systems didn’t account
for. These partners agreed to keep pre-built
integrations up to date with each software
update, providing efficiency and sustainability.
The future is built in the Cloud and the future is
now! What more could companies ask for?

Workday Advanced Compensation | April 2018 2

Advanced compensation What is advanced compensation? and stock. However, some functionality
or compensation cycle and common business practices within
• Review event in First, let’s take a look at how we define
Workday are geared toward an annual
Workday, launched advanced compensation. Advanced
compensation process.
for a specific length of compensation or compensation cycle is
time for the purpose the review event in Workday, launched A compensation administrator typically kicks
of recommending, for a specific length of time for the purpose off this process, during which managers
reviewing and awarding of recommending, reviewing and awarding and HR Partners enter and approve
compensation changes,
compensation changes, bonus payments compensation recommendations for eligible
bonus payments and
stock grants.
and stock grants. Most organizations refer to employees. Upon completion, the award
those activities as their compensation cycle. recommendations are associated with
the employee records automatically and
Advanced compensation is not necessarily
are subsequently picked up by payroll
annual. Many companies execute
for processing.
compensation review cycles quarterly or
monthly for recurring processes like bonus

Several different elements are considered to be part of advanced compensation,

including:
Merit A performance-related process that allows for a base pay increase. Most companies
evaluate merit on an annual basis.
Lump sums A single payment, typically given in lieu of merit or base pay increases. Lump sums
are awarded most commonly by managers who want to give monetary rewards to
employees beyond the maximum pay for their range.
Bonuses Cash payments, also referred to as “short-term incentives” by some companies, which
are distributed during a predetermined payout period. These are one-time incentives
and are not part of either the employee’s base pay or the future base pay increase.
Stock There are different types of stock awards, including restricted stock and incentive
stock options. Stock recommendations and approvals are captured in Workday
but cannot be granted to employees, so companies typically use a third-party stock
administrator to finalize the stock process.

Within most organizations, the population participating in a stock process is smaller.

Allowances Allowances are monies paid regularly to an employee to meet a specific need.
For example, car allowances, housing allowances or uniform allowances.
Additional These are additional pay adjustments to the employee’s base pay for future equity-
adjustments type items.
Promotions These allow for an increase in the employee’s pay grade and/or level within the cycle.

Workday Advanced Compensation | April 2018 3

Workday Point of Annual cycles versus can be configured. Our design team then digs
View (PoV) into the details of their current pay process
• Developed by bringing separate processes
to determine what, if anything, should be
together our HR domain Our recommendation leverages a consolidated
adjusted to make the process effective and
experts and our Workday annual compensation process to include
deployment experts.
efficient in Workday.
merit, lump sum, bonus and stock. This
recommendation stems from what we call From our perspective, cycle timing is the
PoV Tenant
our Workday “Point of View” (PoV). We biggest consideration when determining
• Built for sustainable
and efficient ongoing developed our PoV by bringing together our whether or not to include a plan in a
operations with HR domain experts, who have experience consolidated cycle. The process must be closed
our future-minded operating HR for over 35 large-scale clients, prior to running a payroll that includes any
perspective built into and our Workday deployment experts, with of the award recommendations. For example,
every security role, experience on Workday configuration and if an organization awards merit and stock
process step and report. around the same time in March but waits
integrations since Workday update 2. We
invested in our own Workday tenant and until June to process bonuses, we recommend
“deployed” our PoV as a best practice model, including only merit and stock in the
now referred to as our “PoV tenant.” consolidated annual cycle.
Our PoV tenant is built for sustainable and
Manager input on the compensation award
efficient ongoing operations with our future-
amount provided to the employee is another
minded perspective built into every security
big consideration that affects inclusion
role, process step and report.
in the annual cycle. If a manager has discretion
We like to use this PoV as a starting place for to recommend the amount of one-time
conversations with Workday customers and payments or bonuses, but does not have
adjust configurations and ongoing operations discretion for equity or stock, then equity
depending on their needs. For example, and stock should not launch in the annual
organizations may consider using allowances, compensation cycle.
additional adjustments and promotions, which
offers flexibility in how compensation plans

Workday Advanced Compensation | April 2018 4

Coordination of Events Recent enhancements Additional enhancements in recent Workday
(CoE) framework releases (only available with SPCR) include
• Allows companies to execute Workday has focused on bringing more
the ability to add custom validation
operational changes during enhancements to this area of the tool since
messages, allowing customers to select
an open compensation cycle. Workday 24, including the Coordination of
which organization type to use for their
Events (CoE) framework, stock participation
Configurable Grid compensation review cycle, deferred bonus
rules, the ability to update eligible earnings
• Companies are now able to processing and the ability to define and
overrides for bonus and including employees
define the fields displayed implement a proration grace period for
terminated during the process period.
in the grid as well as the employees on leaves of absence.
indicative data displayed A configurable grid was the next game-
about the employees. Due to these exciting enhancements, many
changer released by Workday which allows
customers have already implemented the
for defining the fields displayed in the grid
Shared Participation SPCR framework, even though they currently
Compensation Review
as well as the indicative data displayed
have the option to choose between the prior
(SPCR) framework about the employees.
Advanced Compensation Event (ACE)
• New compensation
A revolutionary enhancement delivered in framework and SPCR. Workday will, however,
framework that is intuitive
and collaborative.
Workday 26 was the Shared Participation be depreciating the ACE framework with the
• Allows managers at multiple Compensation Review (SPCR) framework. Workday 32 release in March 2019, requiring
levels of the organization and SPCR is much more intuitive and collaborative all customers to use SPCR.
support personnel to work and allows managers at multiple levels
together more efficiently of the organization and support personnel
and effectively throughout to work together more efficiently and
the compensation cycle.
effectively throughout the compensation
• Additional enhancements
cycle. SPCR now also includes the ability
include custom validation
messages, selecting to add custom validations.
organization type, deferred
bonus processing and LOA
proration grace periods.
Compensation PoV Ensure the data is clean before using
• 
As previously stated, within our Workday proration. In Workday, proration is
practice we maintain a very detailed list of calculated based on employee data. If the
configuration options that are in line with data is not clean, proration calculations will
our point of view based on standard business not be correct. This is especially critical in
practices, experience with other customers year one after deployment. If clean data was
and our testing of the Workday functionality. not loaded during the cutover, prorating in
the compensation cycle could lead to
When partnering with organizations, some incorrect compensation values. In year two,
of our top recommendations related to year three and beyond, most organizations
advanced compensation include: are in a much better position to use
One consolidated cycle. A single planning
•  proration if the system has been maintained
cycle for merit, bonus and stock allows with clean business processes and rules.
administrators to focus on the total No in-cycle promotions. In the past, there
• 
employee compensation. were functionality gaps in Workday’s
Eight week cycle. We recommend limiting
•  promotion functionality. When entering a
the cycle duration when coordination of promotion during the cycle, in some cases
events is involved so the system can process follow-up transactions were required to
those transactions without much complete the information that was not
administrative oversight. included in the cycle. Workday has closed
a number of the promotion-related gaps;
Bottom-up budget calculation. Utilize
•  however, these can still be confusing to
Workday to automatically calculate customers. Therefore, we encourage first-
the pool amount and estimate costs based time Workday Compensation users to
on the employees assigned to the plans. consider handling promotions outside
Budget allocations are then made at the of the compensation cycle.
employee level by plan and are rolled up
to each organization within the hierarchy.

Workday Advanced Compensation | April 2018 5

Begin with the end in mind Key configuration Pay for performance. If the client uses
• 
• Determine what comprises a pay-for-performance structure, there
the target percentage or
considerations
are configuration options in Workday
the amount of the various When determining configuration options
Performance Management that directly
pay components included for compensation plans, there are a few
in the process.
impact the advanced compensation process.
key considerations to keep in mind:
These configuration connection points must
Plan assignment • B
 egin with the end in mind. Many be taken into consideration and discussed
• Eligible employees must be configuration decisions are designed to with the talent management team.
assigned to a compensation arrive at one answer—what comprises
plan prior to cycle initiation One critical connection point is the rating
the target percentage or the amount
in order to be picked up by scale. The compensation matrix can use
of the various pay components included
the compensation process. a rating scale to determine merit and bonus
in the process?
guidelines, funding and amounts. Another
Dates • Plan assignment. Eligible employees must critical connection is the timing of the
• There are several critical
be assigned to a compensation plan prior performance cycle. If ratings are a factor in
dates defined during launch.
to cycle initiation in order to be picked up calculating budgets or in compensation
Pay for performance by the compensation process. Customers matrices, there must be coordination between
• There are configuration cannot choose employees to include or the timing of the performance cycle and the
options in Workday exclude in the process using eligibility rules compensation cycle.
Performance Management as they do with other processes in Workday.
that directly impact Our point of view is that the performance cycle
For example, in Workday Performance
the advanced should be closed with finalized performance
Management eligibility rules are defined in
compensation process. ratings before the compensation cycle begins.
templates and control who receives each
If employees’ performance ratings are missing,
template (different from the compensation
the guideline ranges will be blank or incorrect
process). In Workday compensation,
and if ratings are included in budget
employees who are in the plan and qualify
calculations, the budgets will be impacted.
based on the waiting period are auto­
matically included in the cycle. There
are options for maintaining employee
participation in the compensation process,
but these are manual, one-off tasks.
Manually including employees in the process
increases the compensation team’s
administrative workload.

• D
 ates. For each compensation process,
there are several critical dates that are
defined during launch:

Process period Defines the period of time

end date the cycle considers for the
purpose of eligibility.
Organization Tells Workday what date to
snapshot date use for the hierarchy.
Compensation Determines the compensa-
snapshot date tion data that will be used
as part of budget and cycle
calculations.
Effective dates When new base salary
amounts and bonus
payments take effect.

Workday Advanced Compensation | April 2018 6

 Common challenges
Some of the most common advanced compensation challenges include:

Budgets Most of current Workday functionality rolls up budgeting by organization but not by
plan. Some can struggle with this because they want to view and use budgets by plan.
Since Workday 29, budgets are now stored at the employee level which is a
foundation for future enhancements (safe harbor) to make budgets more flexible.
Coordination Customers must have clear rules for the coordination of events features because
of events these are handled within the system automatically based on configuration.
Eligibility Clear eligibility rules are required to ensure the correct employees are assigned to
proper compensation plans.
Leaves of Merit increases for employees on leave are processed with the same effective date
absence as for active employees. As a result, some intervention may be required to ensure
increases associated with an employee on leave are handled according to policy.
Approval The workflow in the SPCR framework does not allow upper level managers to submit
workflow or approve recommendations until all of their subordinates have submitted. Many
may prefer to customize the process flow and approvals and Workday has plans to
address these in upcoming releases (safe harbor).

Take time to reflect on what Preparing for the

went well in the cycle and
evaluate what should be compensation process
handled differently in the Advanced compensation, especially when
next cycle. considering its interaction with performance
management, is essentially a year-round
process. As previously stated, we recommend
limiting the actual cycle to a maximum of eight
weeks, but pre-cycle and post-cycle activities
should be conducted to ensure the process is
successful. For example, for January cycle
launches, cycle preparation can begin as early
as September and payment activities, including
adjustments, not wrapping up until April.

Shortly after the cycle, organizations should

take time to reflect on what went well in the
cycle and evaluate what should be handled
differently in the next cycle. We recommend
using the time from May to September to
make configuration updates incorporating
the improvement opportunities identified.
Some common configuration changes include
creating additional custom reports and
modifying the configurable grid to add or
remove columns or change the employee
information display. It is also critical that time
is allocated to assess and test any new
features Workday has released and determine
if the new features should be implemented.

Workday Advanced Compensation | April 2018 7

“Big bang” approach Approach for implementing If following a big bang approach, we
• All populations go-live at recommend ensuring that clear requirements
the same time.
advanced compensation
are defined for all compensation plans and all
If a customer is considering implementing
matrices, as well as setting expectations within
Benefits advanced compensation in Workday, we
• Ensures you consider and
the organization that all groups must fit
suggest taking a “big bang” approach,
implement a global design. into the overall compensation cycle process.
meaning all populations go live at the same
• Unified change management Flow and timeline are also important for
time. One of the benefits to a big bang
and training approach. overall success. For those in decentralized
• You gain economies of scale. approach is that it ensures you consider
organizations, ensure that at least one subject
and implement a global design for your
matter expert (SME) from each group is
Our recommendations compensation plans and processes.
engaged in the implementation and the
• Ensure clear requirements are
All too often, we see organizations implement decision makers who can agree to or authorize
defined for all compensation
plans and all matrices. with a pilot or a wave approach and when process and requirement changes are present.
• Set expectations that all they subsequently bring on the rest of the Finally, one or more subject matter experts
groups must fit into the company, a large amount of re-work is often (SMEs) from each group should participate
overall compensation required to meet all the needs that were in testing to ensure all requirements have
cycle process. not previously considered. been met.
• Ensure at least one SME from
each group is engaged and An additional benefit of leveraging a big bang
decision makers who can rollout is the ability to have a unified
agree to or authorize process change management and training approach.
and requirement changes
In addition, companies gain economies of scale
have been identified.
from one larger implementation versus several
• SMEs from each group should
participate in testing. smaller implementations.

About Alight Solutions What’s coming soon

As the leading provider of benefits
administration and cloud-based In Workday 31 and beyond, we can look
HR and financial solutions, we forward to Workday releasing additional
enhance work and life through enhancements to the advanced compensation
our service, technology and data.
functionality. For example (safe harbor),
Our dedicated colleagues across
features like the ability to assign recommend­
14 global centers deliver an
unrivaled consumer experience ation approvals outside of the hierarchy,
for our clients and their people. more flexible budgeting options, completing
We are Alight. Reimagining how reorganizations while a cycle is in progress and
people and organizations thrive. pay for individual employee performance
based on goal achievement, are just a few
alight.com of the items Workday is planning.
©2018 Alight Solutions
Advanced compensation is not always viewed
as the most cutting-edge topic, but it’s a
critical process for HR and can be quite
complex. Given the direction Workday is
heading with advanced compensation and
a distinct, experienced point of view to pull
from, this shift to the Cloud can be a true
benefit to companies, compensation
professionals and managers.

To learn more about advanced compensation

or speak to one of our Workday experts,
contact us at [email protected].

Workday Advanced Compensation | April 2018 8