The Reward Life Cycle

In this episode, hosts Lois Houston and Nikita Abraham talk to Cloud Delivery Lead Nigel Wiltshire about the Reward Life Cycle, which centers around the compensation that is given to an employee, and how it is paid and processed.   Compensation, in this case, is not restricted to the salary that is paid to an employee but includes bonuses, stocks, medical insurance, and other benefits.   Oracle MyLearn: https://mylearn.oracle.com/ Oracle University Learning Community: https://education.oracle.com/ou-community LinkedIn: https://www.linkedin.com/showcase/oracle-university/ Twitter: https://twitter.com/Oracle_Edu   Special thanks to Arijit Ghosh, David Wright, Kris-Ann Nansen, Radhika Banka, and the OU Studio Team for helping us create this episode.   --------------------------------------------------------   Episode Transcript: 00:00 Welcome to the Oracle University Podcast, the first stop on your cloud journey. During this series of informative podcasts, we’ll bring you foundational training on the most popular Oracle technologies. Let’s get started. 00:26 Lois: Hi there! Welcome to the Oracle University Podcast. I’m Lois Houston, Director of Product Innovation and Go to Market Programs with Oracle University, and with me is Nikita Abraham, Principal Technical Editor. Nikita: Hi everyone. Last week, we discussed the Employee Life Cycle, the key players involved, and the tasks that come under it. 00:47 Lois: Right, Niki. And if you missed any of the earlier episodes in this season, you’ll want to catch up so you can get a full picture of the HCM business processes. Today, we’re going to discuss the next HCM business process life cycle, the Reward Life Cycle, with our Cloud Delivery Lead Nigel Wiltshire. Hi Nigel, welcome back. Are you tired of talking to us yet? 01:09 Nigel: Hi Lois. Hi Niki. Haha! No, I’m never tired of discussing this topic. Nikita: So Nigel, let me start by asking the question of the day, what is the Reward Life Cycle? Nigel: Niki, if I was asked to describe the Reward Life Cycle in as few words as possible, it would be something along the lines of “The Employee’s Total Worth.” 01:26 Lois: OK. That’s definitely a few words. What do you mean by that? Nigel: This life cycle centres on the compensation that is given to employees and how that compensation is processed and paid. Now, when I say compensation, I’m not just talking about the salary that is given to them for the job they do. This also includes other compensation such as bonuses, stock, and other incentives.  01:47 Nigel: It also encompasses any benefits that are afforded to the employee, which are often funded by the employer, such as Medical Insurance, Dental Insurance, Vacation, Income Protection, and many more. Like I was saying, these benefits are often paid for by the employer and are generally referred to as “Benefits in Kind,” which, depending on country-specific legislation, are often taxable. Some benefits come with various levels of cover that the employee can opt into, such as to cover their spouse or family. These additional options often come with a requirement for the employee to contribute. This is why I referred to it as “The Employee’s Total Worth.” As an example, let’s say an employee’s base salary is US$60,000 per year. On top of this, they also receive bonuses that equate to US$20,000 per year, and have a benefits package paid for by the employer that is worth US$8000 per year. In essence, the employee’s worth comes out at a whopping US$88,000 each and every year. 02:44 Nikita: OK, so bringing the conversation back to HR business processes, Nigel, how many processes make up the Reward Life Cycle? Nigel: There are four: Benefits to Payroll, Time Collection to Payroll, Reward Planning to Targeted Compensation, and Payroll to Payment. Lois: So, can you tell us a little more about each of these? 03:05 Nigel: Sure, Lois. The “Benefits to Payroll” process allows organizations to configure and manage benefit programs. As I was saying earlier, these could include Medical and Dental Insurance, Life and Income Insurance, Savings Schemes, and even the ability to purchase additional vacation time, over the core entitlement. A lot of these are country specific, but in general, they are options that an organization provides, and depending on the level of cover either bear the total cost, or require the employee to contribute to the costs. In the case where the employee needs to make contributions, these deductions are processed by payroll. The second process, “Time Collection to Payroll.” This is the mechanism used to report the time that an employee has spent on various work-related activities. This could be regular time, overtime, time spent on specific projects, and even time spent for an absence from work, all of which could affect the amount of pay an employee receives. This again has to be passed to payroll for processing and payment or adjustment. Some organizations don’t operate this way as their employees get a regular salary regardless of what they do during their working day, and sometimes this will depend on the legislation.  Some employees may need to submit a time card in order to be paid, others may not and will just get paid their periodic pay regardless of how they spend their time. 04:22 Nigel: Now I want to talk a little about “Reward Planning to Targeted Compensation.” If everyone got paid the same, regardless of the job they did or length of service and so on, life would be very simple for the people who have to work out how much to pay an employee. Alas, this is never going to be the case, and rightly so. That’s why there has to be mechanisms in place to establish what a job and or/person is worth, which can be influenced by numerous factors. 04:46 Nikita: And what sort of factors are we talking about, Nigel? Nigel: A technical job would typically pay more than a non-technical job, managerial jobs would typically attract a higher salary than an individual contributor job, and so on. But it is very rarely as cut and dried as that because you could also take years of service and experience into account. This process takes into consideration that compensation is not just about Base Salary. It could encompass incentives, such as Bonus and Commission, which are awarded to individuals for various reasons, such the job they do or where they work, or even how the company is performing. 05:19 Nigel: And the final process is “Payroll to Payment.” Essentially, this is the bit where we actually process all the compensation contributors, such as Salary, Benefits, Absences, and Time Cards, and work out the employee’s periodic net pay, which we subsequently send to their bank as a direct deposit or issue a cheque. Now, that all sounds nice and simple, but actually, when using a payroll system, such as the one we have in the Oracle Cloud, there are a lot of configurations that have to occur for that process to do its thing and get the right amount to the right person. We’re talking about Bank Accounts, Elements, Payroll Definitions, Payment Methods, Costing Structures, Balance Definitions, and many more. Then, of course, somebody has to push the button to start the process, cross their fingers that everything is configured as it should be, and breathe a sigh of relief when everything slots into place and every employee gets paid as expected. 06:16 The Oracle University Learning Community is a great place for you to collaborate and learn with experts, peers, and practitioners. Grow your skills, inspire innovation, and celebrate your successes. The more you participate, the more recognition you can earn. All of your activities, from liking a post to answering questions and sharing with others, will help you earn badges and ranks, and be recognised within the community. If you are already an Oracle MyLearn user, go to MyLearn to join the community. You will need to log in first. If you have not yet accessed Oracle MyLearn, visit mylearn.oracle.com and create an account to get started. 06:55 Nikita: Welcome back. Nigel, since you brought up Base Salary, let’s talk about it a little more. How do employers determine how much someone gets paid? Nigel: Interesting question, Niki. There are many factors that influence the amount of salary that employees are paid. For some organisations, such as those tied to government and public service, salaries are typically laid down through official channels and there is very little to no scope for salary negotiations, and this is because the money is coming from public funds, such as taxes. So there has to be a strict structure for compensation levels and amounts. Having said that, there are some jobs within the government sector that do advertise salary ranges, so there is little wriggle room for negotiations based on the applicant’s experience and knowledge.  07:40 Nigel: For a lot of privately-owned organisations, it tends to be more fluid and salary negotiations are more common. This is why you will often see jobs advertised with the phrase “Salary Negotiable” rather than the actual salary, or you will see the salary range on offer being displayed. Of course, the employer has an idea about the salary they would like to offer based on the job being advertised, and the applicant will already have an idea about what amount they would like, based on previous jobs, or research they have conducted. It’s just a matter of how well the applicant can convince the company about how much they are worth. Of course, if the employee ends up asking for a ridiculous amount, the company will just walk away, so it would not be in the interest of the applicant to go into the conversation with an unrealistic expectation. 08:23 Lois: Nigel, I know some private organizations have a more structured approach to salary levels for each job. How do they set this up? Nigel: You’re absolutely right, Lois. Some organizations use an evaluation system that allows them to score jobs and positions based on a series of criteria, such as Know How, Accountability, and Problem Solving. The overall score is then used to help set a salary, or salary range for the job. For instance, you would expect a managerial job to have a higher score for criteria such as Accountability than those jobs performed by employees within their team. However, it is not always so clear-cut. Let’s say, for instance, that you have an individual contributor level job that is very technical. The scores for Know How and Problem Solving could be way higher than the manager job, so the overall score could end up being higher than the manager job, therefore attracting a higher salary. 09:14 Lois: Interesting. Speaking of salary, let's move on to the processing of payrolls. We know that different countries have different rules when it comes to the processing of many payroll items, like taxes, social security, and the absence adjustments. How do systems like Oracle Fusion Cloud deal with this, especially for global organizations? Nigel: This is achieved in just three words - Legislative Data Groups. And before you ask, let me expand on that. Lois: Yes, please! 09:41 Nigel: As you quite rightly pointed out, different countries (or legislations) calculate and process certain things differently. And the one that stands out the most is taxes. For example, in the US, there are different layers of taxation for salaries, the main ones being Federal and State. Compare that to somewhere like the UK, which only taxes salaries at one level, and we don’t have different rules for the various counties within the UK.  In addition to that, the amount the employee is taxed is usually tied to the level of income, so the more you are paid, the higher the tax rate. And, of course, these bandings are not the same across legislations. 10:16 Nigel: Now due to how complex the rules for these levies tend to be, and how frequently the rules can change, Oracle takes care of the configurations for you, through the quarterly product releases, and provides a way of accessing the right rules for the right legislation. We call them Legislative Data Groups. Having pre-set legislative rules makes it easy for organizations to configure many payroll items within the Oracle Cloud. By simply associating the appropriate Legislative Data Group with the relevant parts of the business, the system will automatically know how to process such things as taxes and social security for any employee who is employed in each part of the business. 10:54 Nikita: Sticking with Payroll for a bit, I know that in some organizations, employees are paid for the work they complete, including overtime, only after they have reported that information. What mechanisms do organizations typically have to allow employees to submit this information? Nigel: Funnily enough, although ultimately the payments are processed and paid through the payroll mechanisms, this question actually relates to time and labor. Some organizations will use time cards for the purpose of reporting time. This relates to the “Time Collection to Payroll” part of the HR business process. These days, with most systems, the onus is on the employee to report time, which then goes to their manager for approval, and ultimately ends up with Payroll for processing. 11:36 Lois: So, will employees have to remember to go into the system and complete or submit a time card each week? Nigel: It depends. For some organizations, yes the employee would need to do that, but for others, the system can be configured to retrieve the information from an external source, such as a card reader, a biometric scanner, or even a kiosk at the reception (or canteen) where employees can clock in and clock out using buttons, having first been identified using facial recognition. We are in the 21st century after all and technology has come a long way in the last few decades. 12:06 Nikita: Well, I think we’ve covered everything under the Reward Life Cycle. Thank you for joining us today, Nigel. We’re learning so much from you. Nigel: Happy to be here with you guys. Lois: Don’t forget to catch up on this season’s previous episodes, including an overview of the entire business process training program offered by Oracle University and the prior HCM life cycles Nigel has shared with us. For more information about the HCM business processes, you can also visit mylearn.oracle.com. Next week, we’ll cover the final HCM life cycle - Talent. Until then, this is Lois Houston… Nikita: And Nikita Abraham, signing off! 12:45 That’s all for this episode of the Oracle University Podcast. If you enjoyed listening, please click Subscribe to get all the latest episodes. We’d also love it if you would take a moment to rate and review us on your podcast app. See you again on the next episode of the Oracle University Podcast.