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IBM ICM, Incentive Compensation Management, Varicent

Using Workflows to Achieve Compliance Goals in Incentive Compensation Management

In the world of incentive compensation, compliance can be a hot topic.  With so many variable pay plans running through a single system, normally administered by a single team, there is ample reason to ensure the proper business processes are being followed.  More stringent legislation in the banking, insurance, and life sciences industries increases the need for well-managed business processes that pertain to incentive compensation.  One tool available to incentive compensation teams to help satisfy compliance demands is utilizing workflows.

How can workflows help with administering complex incentive compensation processes?

Workflow tools allow organizations to wrap business processes in strict, system-governed steps.  This approach offers several advantages over manual controls, including:

  • Clear business process definition
  • Insight into the status and ownership of each process cycle
  • Automated logging of process history and action taken
  • Guidance, reminders, and controls on next steps in the business process
  • Data collection or use in analysis of plan complexity and understanding

What incentive compensation management processes can be automated by workflows?

Depending on the flexibility of the incentive compensation software system, the sky's the limit on business process automation.  Some specific use-cases that are readily solved by a modern incentive compensation management solution include:

Compensation plan acknowledgement. This compliance-driven process ensures that all sales team members have digitally signed off on their new incentive compensation plans, territories, and quotas. Some organizations choose to automatically withhold variable compensation payments until the new plans have been acknowledged.

Incentive payment adjustments. Manual adjustments to payments often require authorization and input from multiple parties, such as the member’s manager and the administrative team.  Establishing a formal workflow process grants clarity, auditability and control to this process.

Incentive dispute resolution. At times, there is a disconnect between what a rep is being paid and what they think they should be paid.  A process that gives team members insight into their inquiry can reduce the burden on the administrative team and provide data on the handling of these requests.

Payroll approval. A typical implementation will involve multiple business roles during the end of period payment process. For example, the compensation administrators will prepare the payment results, the managers or executives will approve the payments and the finance team will be responsible for the release of payments. A workflow can ensure the proper process is followed in a timely manner to meet payroll deadlines.

By structuring these business processes using a formal workflow, administrators can reduce the time spent managing business processes, while field users have better visibility into how their concerns are being addressed.  Compliance teams are satisfied because all sensitive interactions that impact variable pay are now automatically logged and documented.

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