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HR_ECM_00_AD_018 - Define Guideline Proration Rules

HR_ECM_00_AD_018 - Define Guideline Proration Rules

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In this step, you define rules for prorating guideline amounts, percentages or numbers in a two-step process where you successively define the proration basis (based on either days or months) and the rounding of the proration calculation.

Note

Proration applies to guidelines, not to the base salary.

Suppose an employee has held two positions during an evaluation period of one year for 271 and 94 days, respectively, and that for each position, he/she is eligible for the same compensation plan, but with different guideline percentages, for example, 3% and 2%. The formula to determine the prorated guideline amount would be:

(271/365)*3% + (94/365)*2% = 2,74%

The result is the recommended guideline percentage. To calculate the guideline amount, the percentage has to be multiplied by the calculation base (for example, 80,000), evaluated as of the calculation base key date:

Guideline amount = 2,74 * 80,000 = 2,192

Note that in this standard algorithm the calculation base is not prorated, but only calculated once.

You must have performed the activity Define Stock Units, if applicable.

Determine the proration rules that are required in your organization. A proration rule can be used for one or more guidelines.

  1. Select the relevant compensation area.
  2. Choose New entries.
  3. Enter a 4-character code and a description.
  4. Delimit the record.
  5. Select the relevant proration basis.
  • If you have opted for a proration based on days, no further entries are required.

  • If, however, you have opted for a proration based on months, enter the number of days for rounding up the program period and the evaluation period, respectively. If the minimum number of days has not been specified, the number of months is rounded down. If you have, the number of months is rounded provided that the number of remaining days is equal to or greater than the value you have specified, otherwise it is rounded down.

  1. If applicable, set up a rule for rounding the prorated guideline amount, percentage or number. Specify either a currency if you have opted for a guideline amount, or a stock unit if you have opted for a guideline number.
  2. Save your entries.
  3. Repeat the previously mentioned steps for any further rules.






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