- SAP Managed Tags
A special Thank You to the many contacts across the board at SAP who made this blog possible by connecting with us and providing insights on leading market practices.
Introduction
The reason for this blog comes from the dreaded comment/requirement by customers to implementation partners in Compensation workshops : "We understand your leading practice of loading a budget % based on attributes (for example: attribute 1=country / attribute 2=state) but all we get from Finance each year is a maximum amount to be spent so we'd like to be able to assign a flat amount to each planner worksheet". In this blog we try to give tools to understand the bottom-up logic that facilitates the creation of budget percentages based on attributes that stick to SAP SuccessFactors leading practices (see budget section).
Walkthrough of the Budget Design Process before it gets loaded as a % in SAP SuccessFactors Compensation Module.
With the example of a January salary review cycle start.
The budget design process for salary increases involves different approaches across countries and roles. While some organizations apply a flat dollar increase to all employees across the board (sometimes as a result of Union negociations for example), most companies use a percentage-based or bottom-up approach, breaking down the overall budget into percentages by attributes based on projected needs. This method allows for more dynamic updates during the cycle as well as more flexibility in terms of "Reward to Retain" aka retaining key talents.
Projected Salary Increase for upcoming cycle
- Projections are informed by external surveys (e.g., Mercer, Aon, Towers Watson).
- These surveys are typically free if companies participate.
Differentiation by Role
- Budgeting distinguishes between professional roles vs. management.
- Executive compensation is often analyzed separately from all other employees.
Country-Level Variations
- Budgeting is localized to address country-specific rules and labor conditions.
- For example:
- Belgium: Annual base salary increases are mandated by the government and deducted from the country’s salary budget.
- Austria and UK: Legal frameworks such as minimum wage laws dictate baseline adjustments.
- UK: Adjustments are based on national minimum pay.
Legal and Mandatory Increases
- These are typically mandated by:
- Union agreements
- Government regulations
- These increases are generally provided as percentages.
Managerial Discretion & Special Adjustments
- HR Teams may adjust salaries based on team needs or specific market conditions.
- Special adjustments (e.g., retention, market corrections) are budgeted separately and tailored by country.
Workforce Changes & Their Impact
- Headcount shifts due to employee turnover impact increase percentages and must be factored in.
- Companies must also consider part-time transitions and fluctuating employment statuses.
Conclusion
- Country-specific budget percentages are refined several times before January using specialized compensation surveys and legal constraints.
- Finance teams provide investment volumes, which are then translated into controllable country-level percentages.
Additional Resources:
All the best,
Xavier
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