Configuring Performance Ratings in Oracle Fusion is essential for integrating employee performance data into the compensation process. Performance ratings can influence merit increases, bonuses, or stock allocations, allowing organizations to reward high-performing employees appropriately. Here’s a step-by-step guide on how to configure performance ratings within a compensation plan in Oracle Fusion:
1. Navigate to Compensation Work Area
- Go to Navigator > Compensation > Manage Compensation Plans.
2. Open the Compensation Plan
- In the Compensation Work Area, select the compensation plan in which you want to configure performance ratings.
- Click on Edit Plan to modify the setup or create a new plan.
3. Go to the Performance Section
- Once the compensation plan setup page opens, navigate to the Performance tab.
- This section allows you to configure how performance ratings are used within the compensation plan.
4. Integrate Performance Ratings
You can configure how performance ratings from the performance management system or other sources are integrated into the compensation plan.
a) Select Performance Document
- Choose the performance document or source from which the performance ratings will be pulled. Performance ratings might come from the employee’s most recent appraisal or another performance review cycle.
- The system will automatically bring in these ratings to the compensation plan and associate them with each employee’s record.
b) Configure Rating Scale
- Define the rating scale that will be used for the plan. Oracle Fusion supports multiple rating scales, such as:
- 1 to 5 (e.g., “1 – Poor”, “5 – Excellent”)
- Percentage ranges (e.g., 0%-100%)
- Custom scales (based on your organization’s performance criteria)
- Ensure the rating scale is consistent with the rating system used by your performance management process.
5. Use Performance Ratings in Plan Components
Performance ratings can be used to determine how compensation is allocated across different components, such as salary increases, bonuses, or stock awards.
a) Set Performance-based Guidelines
- Go to the Guidelines section and create rules for how performance ratings affect compensation adjustments. For example:
- Employees with a rating of “5 – Excellent” receive a merit increase of 10% or a bonus of 15%.
- Employees with a rating of “3 – Meets Expectations” receive a smaller merit increase of 3% or no bonus.
- Define these guidelines based on your compensation strategy.
b) Create Performance Tiers
- You can create tiers or brackets based on performance ratings to group employees and assign different compensation amounts:
- Tier 1: Employees rated 5 (Excellent) receive the highest reward.
- Tier 2: Employees rated 4 (Above Expectations) receive a moderate reward.
- Tier 3: Employees rated 3 (Meets Expectations) receive the standard reward.
6. Define Conditional Logic for Performance-Based Compensation
- You can add conditional rules in the Guidelines or Eligibility sections to control how performance ratings influence compensation. For example:
- Condition: If the employee’s performance rating is “5 – Excellent”, then award a merit increase of 10%.
- Condition: Employees with a performance rating below “3 – Needs Improvement” may not be eligible for any merit increase.
7. Validate Performance Rating Data
- Once you have configured how performance ratings are integrated into the compensation plan, ensure that the ratings data is correctly pulled from the performance management system.
- You can validate this by running a test plan with sample employee data to check if the ratings are imported correctly and applied according to the rules you’ve set.
8. Use Performance Ratings for Budget Allocation
- Performance ratings can also be used in conjunction with budget allocation:
- For example, allocate more of the budget to top-performing employees and less to those with average or below-average performance.
- Go to the Budget Pools section and configure allocation rules based on employee performance tiers.
9. Configure Alerts Based on Performance Ratings
- Set up alerts in the worksheet to notify managers if they try to award compensation that is inconsistent with an employee’s performance rating.
- For example, alert the manager if they propose a high merit increase for an employee with a low performance rating.
10. Test the Plan
- After configuring the performance ratings in the compensation plan, run tests to ensure the rules and guidelines work as expected.
- Test with different employee records to verify that the correct ratings and corresponding compensation adjustments are applied.
11. Finalize the Plan
- Once the performance ratings and related compensation rules are configured and validated, finalize the compensation plan.
- During the compensation cycle, managers will be able to see the performance ratings of their employees directly in the compensation worksheet and make decisions accordingly.
Example Scenarios for Using Performance Ratings:
-
Merit Increase Based on Rating:
- Rating of 5 (Excellent): Eligible for a 10% merit increase.
- Rating of 4 (Above Expectations): Eligible for a 7% merit increase.
- Rating of 3 (Meets Expectations): Eligible for a 3% merit increase.
- Rating below 3: Not eligible for a merit increase.
-
Bonus Allocation Based on Rating:
- Rating of 5: Eligible for a bonus of 20%.
- Rating of 4: Eligible for a bonus of 10%.
- Rating of 3: Eligible for a bonus of 5%.
- Rating below 3: Not eligible for a bonus.
-
Performance Alerts:
- If a manager tries to award a merit increase of more than 5% to an employee with a rating of “3 (Meets Expectations),” an alert will notify them that the action exceeds the company’s guidelines.
Summary of Key Steps:
- Navigate to the Performance Section and select the performance document from which ratings will be pulled.
- Define Rating Scale (e.g., 1-5, percentages) consistent with performance management.
- Set Guidelines and Tiers for performance-based compensation adjustments.
- Add Conditional Rules for performance rating-driven actions in salary, bonuses, or stock allocations.
- Validate the Performance Ratings to ensure they are correctly applied.
- Test the Plan and finalize it before the compensation cycle begins.
By integrating performance ratings into compensation plans, Oracle Fusion allows organizations to create a performance-based compensation structure that aligns employee rewards with their achievements and contributions.
Comp Plan Setups- Configure Performance Rating