Custom Compensation

By Period Attribute

The By Period attribute is a newly added workforce attribute that allows you to assign and manage values that vary across specific periods, such as months or years. This attribute type is particularly useful for scenarios where compensation elements, such as overtime factors or bonus adjustments, need to change dynamically over time rather than remain fixed. Click here to learn more about the By Period attribute.

Use Case: Overtime Salary for Hourly Employees

While there are multiple ways to calculate overtime pay for hourly employees, let's explore one of the most effective approaches.

To calculate the overtime salary, do the following:

1. Create a By Period Attribute, called Overtime Factor which is set as follows:

   1. From January to March 2024, the overtime factor is 1.5.

   2. From April to September 2024, the factor changes to 2.

   3. From October to December 2024, the factor reverts to 1.5.
      
      

2. Create a custom compensation, Overtime Salary.

   This item calculates overtime salary based on standard working hours, overtime percentage, applicable overtime factor, and hourly rate.

   Overtime Salary Calculation: An employee’s Overtime Hours %, a compensation item, is multiplied by their Standard Working Hours per Month, an employee attribute, to determine total overtime hours. This is then multiplied by the Overtime Factor, a by-period attribute created, and the Hourly Rate, another employee attribute, to calculate overtime pay. The system ensures fair and consistent pay adjustments by applying organization-specific multipliers to reflect overtime policies.

3. Once the custom compensation item is created, map this to an employee.
   The Overtime Salary will be calculated accordingly.
   For example, the Over Time Salary calculation for an employee, Pattie Morin is shown in the employee report.

   Note: If this compensation item is mapped to employees with an Annualized Salary Class, no calculation will be displayed. This applies only to employees with an Hourly Salary Class.
   
   Note: By Period Attributes are linked to custom compensation items, not directly to individual employees. So, by-period attributes and custom compensation items cannot be loaded during an employee load using Data Load Rules.

Range Attribute

The Range attribute is introduced to maintain data at a range or threshold level, which can be used as a reference table to do calculations such as UK NI, CPP, or maintain the ranges for PS Billing hours, and so on.

Note: The Range attribute has been introduced to support the range-based functions. Click hereto learn more.

Once the Range Attribute is fully defined, it can be referenced and utilized while building logic using the Custom Compensation.

Use Case: Range Attribute for UK National Insurance (NI) Calculation

The UK National Insurance (NI) calculation has range attributes and tier-based calculations. So first, a range attribute called UK NI is created where the following thresholds are configured. Click here to learn more about how this attribute is used when using the RangeCalculation.Floor and the RangeCalculation.Tier functions.

The functions allow you to create dynamic, data-driven formulas based on employee attributes, compensation items, and time-based criteria, enabling you to develop tailored compensation strategies for your organization.

When building compensation logic in Custom Compensation, these functions can be accessed easily by typing the @ symbol. This brings up a list of the following functions that you can use to define your compensation calculations.

Ranged Based Functions

RangeLookup

This function allows you to perform lookups based on salary bands or tax brackets, making it easier to handle compensation calculations that vary depending on an employee's salary or other attributes.

Use Case: Salary Band Rate Calculation

The HR team wants to apply a Salary Band Rate (percentage) to employees based on their salary range. The percentage varies depending on the salary bracket, and this percentage is applied in compensation calculations.

1. Define the Salary Range Attribute using the Range Attribute. Click here to learn more about the Range attribute.
   
   

2. Create a custom compensation, Salary Band Rate. This compensation item determines the applicable Salary Band Rate based on an employee’s salary.
   Salary Band Rate Calculation:

   The RangeLookup function determines an employee’s position within the predefined Salary Range, a range attribute created above, by referencing Salaries, a compensation item. This ensures that compensation aligns with structured pay scales, maintaining consistency and fairness in salary administration.
   

3. Map this custom compensation to the employee. When applied, the function determines the Salary Band Rate for each employee based on their salary:
   For example, the Salary Band Rate calculation for an employee, Sherry Young is displayed as shown in the employee report below.

   

RangeCalculation.Floor and RangeCalculation.Tier

When calculating compensation, two primary approaches can be used: Floor-based and Tier-based calculations. These determine how compensation rates apply based on predefined salary or performance bands.

RangeCalculation.Floor

This function applies a flat calculation based on the value of a specified range. The compensation rate is determined solely by the band in which the value falls, without considering other bands.

Example: Sales Performance Evaluation is calculated by comparing an employee’s actual sales achievements against their predefined sales target. A floor function is applied to prevent overestimation of results, ensuring fair performance assessment and alignment of incentives with actual achievements.

RangeCalculation.Tier

This function is designed for tiered compensation structures, where different compensation rates apply progressively across multiple bands. Instead of a single flat rate, earnings accumulate based on the employee's performance or sales milestones.

Example: Sales Performance Evaluation is calculated by comparing an employee’s actual sales achievements against predefined sales target thresholds. A tiered function is applied, where compensation accumulates progressively across different levels, ensuring fair rewards and motivating higher performance.

Understanding Floor-Based vs. Tier-Based Calculations

Understanding Floor-Based Calculation

In a Floor-based calculation, the contribution rate only applies to the specific salary band in which the salary falls. This means that only one rate is used, based on the employee’s total salary.

Example: Employee Salary = £30,000

• The salary falls within the £25,001 - £50,000 band.

• The contribution rate for this band is 10%.

• Calculation: £30,000 * 10% = £3,000

Key observation: Only the rate for the specific salary band is applied, without any tiered accumulation.

Understanding Tier-Based Calculation

A Tier-based calculation applies the contribution rate across each tier up to the employee’s salary. This means that each salary band’s rate is applied up to the salary’s limit within that band.

Example: Employee Salary = £30,000

• £0 - £10,000: 0% → £10,000 * 0% = £0

• £10,001 - £25,000: 5% → £15,000 * 5% = £750

• £25,001 - £30,000: 10% → £5,000 * 10% = £500

• Total Contribution: £0 + £750 + £500 = £1,250

Key observation: Each salary band’s rate is applied cumulatively, making the total contribution more granular than in Floor-based calculations.

• Use Floor-based calculations when a fixed compensation structure is needed, ensuring employees in the same range receive the same rate.

• Use Tier-based calculations when progressive earnings are required, rewarding higher sales or salaries with increasing contribution levels.

Now let’s understand how these functions (RangeCalculation.Tier) are used for UK NI calculations.

Use Case: Using Range Attribute and Range Calculation Tier for UK National Insurance (NI) Calculation

UK National Insurance (NI) requires employees to contribute based on earnings exceeding specific thresholds. Contributions follow a tiered structure, where different portions of income are taxed at different rates. This calculation is performed using the range attributes and tier-based function in custom compensation. Here's how the expression is built using range attributes and how it is reflected in reports.

1. Define the UK NI Attribute using the Range Attribute. Click here to learn more about the Range attribute.
   
   

2. Create a custom compensation, UK National Insurance (Tier) using the RangeCalculation.Tier function.
   Example: UK National Insurance (Tier) Calculation

   The RangeCalculation.Tier function determines the applicable UK NI (National Insurance) tier, a range attribute created above, based on the employee’s Salary, a compensation item. This function ensures accurate payroll processing by categorizing employees into the correct NI contribution tier according to predefined salary thresholds.
   

3. Map this custom compensation to the employee. When applied, the function determines the UK NI calculation for each employee based on their salary.
   For example, the UK NI calculation for employee Jeffrey McLoughlin is displayed as shown in the employee report below.

   Note: The data is available as a Dimension Member in Dynamic Reports & Dashboards, allowing organizations to track NI costs efficiently.
   

Date-Based Functions

The following are the date-based functions:

• EOMONTH: Determines the last day of the month for date-based calculations, particularly useful for anniversary bonuses or year-end calculations.
  Example: EOMONTH(Attr[Hire Date], 1)
  Result: Calculates the last day of the month following the employee's hire date, often used in determining eligibility for monthly bonuses.
  

• FISCAL_YEAR: Helps determine the fiscal year based on a date, which is important for planning and year-based compensation adjustments.
  Example: FISCAL_YEAR(Attr[Hire Date])
  Result: Returns the fiscal year corresponding to the employee’s hire date, which can be used to align compensation adjustments with the fiscal calendar.
  

• PERIOD_DATE: Used for precise date handling, particularly for processing compensation based on periods or fiscal dates.
  Example: PERIOD_DATE(Attr[Review Date], 1)
  Result: Returns a specific date within the review cycle, which helps when processing compensation tied to review periods.
  

Use Case: Date-Based Functions for Fiscal Compensation Calculations

Date-based functions help calculate fiscal compensation accurately by considering start dates, proration, and fiscal periods. These functions ensure precise salary calculations, pay adjustments, and compliance with the financial timeline.

To capture the salary impact of new hires for the fiscal year they hired, a custom compensation, New Hire $ Impact is created. The logic for this item ensures that only employees whose hire dates fall within a specific fiscal year are included in the calculations.

1. Define the custom compensation,  New Hire $ Impact.  This calculates the financial impact of newly hired employees on total compensation costs.
   An employee’s DATE_HIRED, an employee attribute, is evaluated to determine if they were hired within the current fiscal year. The EOMONTH function checks if the hire date falls within or before the current period’s end date, while FISCAL_YEAR ensures it matches the fiscal year of the period. If both conditions are met, the Unadjusted Salary is applied; otherwise, the salary is set to 0. This ensures that only eligible new hires within the fiscal year are included in salary calculations.

2. Map this custom compensation to the new hire employee profile. For example, in the report, the Hire Date is January 1, 2025.
   
   

3. Click the employee report and you can see that the function determines the New Hire $ Impact calculation for each employee based on their salary.
   For example, for an employee, Mark Downey, the item is calculated and displayed monthly for the fiscal year.

   • The compensation impact begins in FY25 and is shown from February 2025 through December 2025, since the joining date is from January.

   • The calculated salary impact stops at the fiscal year, FY25, and does not carry over into FY26.
     

Other Function(s)

Unadjusted Salary

This function calculates the salary impact based on an employee’s termination date. This function determines whether an employee’s salary should be reduced or removed from the payroll when their termination falls within the reporting period.

Note: The UnadjustedSalary() function currently considers only the wage type, excluding other compensation items.

Use Case: Employee Termination Impact on Salary Calculation

1. Create custom compensation, Termination $ Impact.
   An employee’s Termination Date, an employee attribute, is evaluated to determine if it falls within or before the current period’s end date. The EOMONTH function ensures alignment with the period, and if the condition is met, the Unadjusted Salary is subtracted to reflect salary removal for the terminated employee. Otherwise, the salary remains 0, ensuring accurate payroll adjustments based on employment status.
   

2. Map this custom compensation to the employee. In this example, the employee’s termination is scheduled for August 15, 2025.
   
   

3. Click the Employee Report and you can see the Unadjusted Salary calculation based on termination dates as shown below:

   • The salary adjustments are made based on the employee’s status.

   • Negative values indicate salary deductions due to termination.
     

   IF

   The IF unction enables conditional logic in your custom compensation formulas by returning different values based on whether a condition is true or false. This is useful for handling performance-based bonuses, eligibility rules, or any logic that varies by employee attributes or compensation thresholds.

   By applying business logic directly in formulas, IF enhances flexibility and precision—automating compensation decisions like bonuses, merit increases, or exclusions based on predefined criteria.

   How it Works

   The function evaluates a condition, and:

   • If the condition is true, it returns the value_if_true.

   • If the condition is false, it returns the value_if_false.

   This allows you to easily create branching logic based on employee data without needing complex nested expressions.

   Function Syntax  

   IF(condition, value_if_true, )

   Parameters

   • condition (Boolean expression)
     The logic to evaluate. This typically compares an attribute or value

   • value_if_true (Numeric or expression)
     The result returned if the condition evaluates to true

   • value_if_false (Numeric or expression)
     The result returned if the condition evaluates to false

ProrationFactor

ProrationFactor makes it easier to account for real-world scenarios—like mid-period hires, terminations, or department transfers—by automatically adjusting compensation amounts based on how much of the period an employee was active. This means you can create time-sensitive compensation models without manually calculating partial-period adjustments.

By dynamically adjusting amounts based on the number of days worked, this function improves the accuracy of Custom Compensation and goes beyond basic date checks to offer more granular control.

How it Works

This returns a decimal value (between 0 and 1) representing the portion of a compensation period an employee was active or inactive.

• Function Syntax: ProrationFactor("Input")

• Parameters: The "Input" determines how proration is calculated. You can choose one of the following:

  • ActiveDays: Returns the portion of the period the employee was actively working. Active days include any day the employee is employed.

  • InactiveDays: Returns the portion of the period the employee was not actively working. Inactive days include time before the start, after termination, or during unpaid leave.

• Return Value: A decimal value between 0 and 1 representing the proration factor based on the selected mode.
  

Let’s understand this with a use case.

The HR team wants to calculate employees' compensation accurately based on their actual days worked during a month. For example, if an employee joins on June 11 in a 30-day month, only the remaining 20 days should be considered for salary calculation. The employee’s full monthly salary is $3,000, but because they were only active for 20 out of 30 days, the prorated amount paid is $2,000.

Below are the other use cases:

• If the employee has 0 active days, the function returns 0 when using ActiveDays.

• If the employee has 0 inactive days, the function returns 0 when using InactiveDays.

• The function is based on the workdays setup. Click here to learn more about Workday Setup.

• If the function is used before the employee’s position start date, no value is returned.