FAQ: Merit, Bonus, and Stock Pool Calculations

These calculations don't take proration or rounding into consideration.

How is a merit pool calculated?: Workday calculates a merit pool using the compensation basis and merit targets of employees in the same organization and merit plan:

Compensation Basis of Employees in Org. & Plan * Merit Plan Targets of Employees in Plan = Merit Pool

For employees managed by a compensation basis total, the compensation basis is the Primary Compensation Basis. Otherwise, the compensation basis is the total base pay, excluding amount-based compensation plans.

If there's a weighted compensation matrix on the merit plan, the merit pool calculation is:

Compensation Basis of Employees in Org. & Plan * Merit Plan Targets of Employees in Plan * Weighted Compensation Matrix = Merit Pool

Workday evaluates these factors in order when calculating merit targets:
Individual target override: You can configure the merit plan with an option to allow individual target overrides. You can then edit merit plan assignments and override merit targets during a compensation or staffing transaction.
The individual target, if configured, overrides factors
2
,
3
, and
4
in the merit pool and the employee target calculations.
Nonweighted compensation matrix: Usually includes performance or potential rating, compa-ratio, retention rating, pay range segments, or eligibility rules.
If the employee meets criteria specified in the compensation matrix, Workday doesn't consider factors
3
and
4
.
Merit plan profile targets: You can configure the merit plan with profile targets based on eligibility rules, such as country or location. During processing, Workday uses eligibility rules to determine the target award for an employee and to calculate the merit pool.
If the employee meets criteria specified in a merit plan profile target, Workday doesn't consider factor
4
.
Default plan target. You can configure merit plans with a default target. Workday uses the default target to calculate the merit pool and award when it can't find an individual target override, compensation matrix, or merit plan profile.
If Workday can't calculate the merit pool and employee target from evaluating factors
1
through
3
, it uses the default plan target.
How is a bonus pool calculated?: If the bonus plan doesn't have a weighted compensation matrix or modifier scorecards, and isn't associated with an eligible earnings override, the bonus pool calculation is:

Employee Eligible Earnings Amount / Period Specified by Plan Frequency * Employee Bonus Target = Bonus Pool & Employee Bonus Target

If the bonus plan doesn't have modifier scorecards and isn't associated with an eligible earnings override, but does have a weighted compensation matrix, the bonus pool calculation is:

Employee Eligible Earnings Amount / Period Specified by Plan Frequency * Employee Bonus Target * Weighted Compensation Matrix = Bonus Pool & Employee Bonus Target

If there are company or modifier scorecards on the bonus plan, the employee bonus target and bonus pool calculations are:

Employee Eligible Earnings Amount / Plan Frequency * Employee Bonus Target * Scorecard or Modifier = Bonus Pool & Employee Bonus Target

With a weighted compensation matrix, company or modifier scorecards, the bonus pool calculation is:

Employee Eligible Earnings Amount / Plan Frequency * Employee Bonus Target * Weighted Compensation Matrix * Scorecard or Modifier = Bonus Pool & Employee Bonus Target
How does a bonus pool calculation differ from a merit pool calculation?: Like the merit target, the bonus target results from individual target overrides, compensation matrix, bonus plan profile targets, or the bonus plan default target. However, the bonus target uses eligible earnings during the period specified by the plan frequency. It can also include company or modifier scorecards that reflect corporate or division performance.
Can I see the detailed bonus calculation?: Yes, provided the process uses a grid configuration that includes the
Rounded Total Target Amount
and
Actual Bonus Amount
advanced fields. You can drill down on these fields to reveal exactly how Workday calculated the bonus.

You can also run the
View Bonus Calculation
report to display how Workday calculated:
Total Bonus Target Amount
Bonus Actual Amount
Discretionary Target Amount
Nondiscretionary Target Amount
Sum of Proration Segments

You can provide unconstrained or role-based access to the
View Bonus Calculation
task through the Process: Compensation Review Bonus Details
domain.
How does a change in FTE % affect the bonus calculation?: If you create a proration rule based on FTE Changes in Period
and add it to a bonus plan, Workday evaluates FTE % changes between the
Process Period Start Date
and the
Process Period End Date
. If the FTE % changes during the process period, Workday divides the process period into proration segments when calculating bonuses.

Example: For the 2015 bonus period, Terry's FTE % changed from 100% to 50%. Workday created 2 proration segments at 100% and 50%, respectively.

Workday then calculates each proration segment separately:

FTE % * Proration % * Target %

Workday then sums all proration segments before calculating eligible earnings.; If you enable
Paid FTE
in the Staffing section on the
Maintain Localization Settings
task, Workday uses the paid FTE override in the calculations for these compensation review targets:
Allowance
Bonus
Merit
Stock

When you drill down on a bonus target during a compensation review, Workday displays the calculation, including the
FTE %
and
Proration %
.
What causes a change to the bonus scorecard profile and what is the effect?: These business processes can cause a change to the bonus scorecard profile:
Change Job
Change Organization Assignment
Move Workers (by Organization)
Move Workers (Supervisory)

Workday prorates on custom organizations for organization changes that occur outside of a compensation review process. However, compensation review coordination of events only processes organization changes for organizations included in the compensation review process.

If the Scorecard Profile Changes in Period
proration rule is associated with the worker's bonus plan:
Workday evaluates the bonus scorecard changes between the initiation of the bonus period and the
Process Period End Date
.
Creates proration segments when calculating bonuses.
How does individual or company performance affect an employee's bonus target?: A performance rating (part of a compensation matrix) or a compensation scorecard can both be factored into the bonus target calculation:

Employee Bonus Target * Individual or Corporate Performance = Employee Bonus Target
How is a stock pool calculated?: Stock pool calculations derive primarily from the compensation matrix and stock target (shares, amount, or percent). Percent-based stock plans must reference a compensation basis. Example:

Target * Total Base Pay * Weighted Compensation Matrix = Stock Pool

You can configure the stock plan to split the stock award into different types of grants. Example: 50% stock options and 50% Restricted Stock Units.

If you apply the stock participation rate when you initiate the compensation review process, then:

Target * Total Base Pay * Weighted Compensation Matrix * Stock Participation Rate = Stock Pool

The stock participation rate doesn't affect employee stock targets. However, you can change stock targets using calculated fields.
Does plan type affect how Workday calculates pool and spend for target changes?: Yes. Workday calculates pool and spend differently for amount-based and percent-based plans. For amount-based plans:

New Plan Target Amount - Old Plan Target Amount

For percent-based plans:

New Target % * New Basis or Salary - Old Target % * Old Basis or Salary

A percent-based plan might result in spend for target pools even if the target is unchanged. Example: A 10% allowance plan for an employee whose salary changes from 100,000 USD to 200,000 USD results in a spend of 10,000 USD.
How does Workday handle remainder amounts?: Workday stores pool contributions at the individual employee level and calculates pools once at process initiation to determine pools at the organization level. Workday stores remainder amounts at the organization level. Example: An organization has a 10,000 USD pool divided among 3 employees with each receiving 3,333.33 USD. Workday stores the remaining 0.01 USD at the organization level.

The Next Level: Compensation Plans and Pools