The Reward Life Cycle
Description
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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.
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?
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."
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.
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.
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?
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.
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.
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.
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 Definit
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