General

BonusRight is an interactive tool designed to enable you to build, operate, and communicate your unique and customized bonus program. You can obtain help and guidance by utilizing this help section, experimenting with different inputs, and communicating with a Client Service Representative or Plan Consultant.

Feel free to create different Plan Drafts (by selecting “Draft” in the Status field under Plan Information). By creating multiple drafts you can experiment with different planning features. Your subscription status will allow you to “activate” a specified number of plans at a given time.

Glossary of Terms

1 Factor

A choice made in the “Budget” section. Will company results be determined by a single financial factor, such as Operating Income or Pre-tax Income? (Contrast with “2 Factor”)

2 Factor

A choice made in the “Budget” section. Will company results be determined by two financial factors, such as Revenue and Margin? (Contrast with “1 Factor”)

Adjustments

A section in plan Operations where you can change the status of Participants, such as for promotions, salary changes, terminations, and new hires.

Allocable Pool

The Total Bonus Pool less the Reserve. The Allocable Pool is typically the sum of the bonus payments for all participants prior to individual changes on the Finalize tab.

Allocation

This is a specific step in the Plan Design process where you will decide the proportion of Participant’s bonus that may be allocated between company, Org Unit, andIndividual Performance. For example, 50%, 25%, 25%.

Annual Reserve Spent

When calculating your bonus payments on the Finalize tab, you can see how much of your Reserve has been used for individual exceptions, exceptional Org Unitperformance, or other operational decisions. In theory, you can overspend your Reserve when necessary.

Ascending

When establishing the metrics for Org Unit key performance indicators you need to indicate whether larger or smaller values are preferred. If a higher value is better, select Ascending. If a smaller value is better, select Descending. For example, Sales is always an Ascending goal (more sales are good!). Customer attrition is an example of a Descending goal.

Base

BonusRight uses “Base” to describe minimum acceptable performance for justification of any bonus payments. Think of it as being short for “Baseline.” Base level profits result in a Bonus Pool. If profits fall one dollar under Base, there would be no bonuses. As a rule-of-thumb, companies should expect to achieve Base profits in 4 out of 5 years.

Bonus Bump

Term used to describe the additional amount of bonus to add to a participant’s Base or Target bonus value. Assume that company performance exceeded Base production, but was less than Target production. The employee is entitled to a Preliminary Bonus that is greater than the Base value but less than the Target value. Her base value was $10,000 and her Target value was $15,000. There’s a $5,000 difference. Apply the Bonus Ratio on that difference. Assuming the Bonus Ratio is 20%, the employee would have a Preliminary Bonus of $11,000 ($10,000 + (20% X $5,000)). The same principle applies for performance falling between Target and Superior. In a 1-Factor plan it’s possible to have additional degrees of performance between Base and Target (Base Plus) or between Target and Superior (Target Plus).

Bonus Pool

The sum of all bonuses at a given production level. You will define the Bonus Pool at Base, Target, and Superior. At the end of the performance period, you will calculate the actual Bonus Pool by inputting results.

Bonus Ratio

The Bonus Ratio is used when calculating actual bonuses in the operational stage. It measures the percentage achievement from the Base to Target Bonus Pool (BP) actually earned; or likewise, the percentage achievement from the Target to Superior Bonus Pool. For example, assume the BP at Base is $100,000 and the BP at Target is $160,000. The distance between the two pools is $60,000. Now assume the company’s actual results produced a BP of $120,000. This represents an increase of $20,000 above the Base BP. We can now calculate the Bonus Ratio to be 33.3% ($20,000/$60,000). You might think of it as, “Our BP traveled 33.3% of the way from Base to Target.” The same calculation would apply if the actual BP lands between Target and Superior, except you would calculate the distance between the corresponding Target and Superior BPs. What if actual results exceed Superior? In a 2-Factor plan, you would simply follow the same calculation as for a pool that lands between Target and Superior—resulting in a Bonus Ratio greater than 100%. This is because a 2-Factor plan carries forward the highest achieved Bonus Metric percentage for results greater than Superior. For a 1-Factor plan, you can select the Bonus Metric percentage for results beyond Superior. It may even be 0%. But the same principle applies.

Budget

The step in the design stage where you select the total dollar commitment for the plan. In a Sum of Targets plan this is the sum of all employee bonus targets plus theReserve. In a Set a Budget plan, the Budget is an input which may be expressed in dollar terms or as a percentage of profits. The system starts with the Budget at Targetlevel production, and then allows you to select a lower and higher value (Base and  Superior).

Calculation

A step in the operations portion of the system. This is where you see the Preliminary Bonus for each participant and verify the results of changes on the Adjustment tab.

Corporate Funding Metrics

Part of the Metrics design step. Here you review and modify the relative spacing of Bonus Pool values that lie between Base and Target and Superior. The system creates equal spacing between all fields. You can modify as desired.

Default Ratio

Used when defining Org Unit metrics. The Default Ratio establishes the relationship between the values at Target and the values at Base and Superior. For example, assume a Target value of 100 and a Default Ratio of 10%. The Base value would be 90 (10% lower than Target) and the Superior value would be 110 (10% higher than Target). The system will reflect given Default Ratios and you should modify them to fit the circumstance.

Descending

When establishing the metrics for Org Unit key performance indicators you need to indicate whether larger or smaller values are preferred. If a higher value is better, select Ascending. If a smaller value is better, select Descending. For example, Sales is always an Ascending goal (more sales are good!). Customer attrition is an example of a Descending goal.

Employee

The default term used by the system to describe all individuals entered into Manage Employees. You can change the term to fit your preference in Settings.

Employee ID

The system requires a unique numeric identifier for all employees. You can use payroll number or any other numeric value. Social Security numbers should not be used.

End of Service

The general description of any form of employee termination or separation. You designate End of Service on the Manage Employees tab.

Finalize

The last stage in the operations stage. This is where you make final adjustments and exceptions before preparing the Bonus Payments report.

Forecasted Bonus Pool

This value appears on the Results tab of the operation stage. The Forecasted Bonus Pool is the calculated value of the company bonus obligation based on the input of company performance results.

Grade

A term describing the way employees are grouped together for planning purposes. You can rename this term under Term Definitions in the Settings section of the tool. Common terms include band, paygrade, tier, level, or group.

Hire Date

The date the employee was first hired by the company. The date does not need to be precise as long as the employee was hired prior to the plan year.

Individual Performance

An indication of whether an employee’s performance will affect his or her bonus payout. See Individual Performance below for a full explanation of this concept.

Last Year’s Total Incentives

The system will compare a projected bonus for an individual with the previous year’s value if you identify that amount in the Manage Employees section.

Leave of Absence

An approved absence from work for a temporary period of time.

    Operation

The section of the BonusRight system where you input results, make adjustments, and determine final bonuses.

Organization Unit Metrics

A section in Plan Design stage where you determine the metrics or Key Performance Indicators that are part of the Org Unit allocation in the plan.

Organizational Unit (Org Unit, OU)

Any type of company unit of operation that might be accounted for in the plan. This can include divisions, departments, business units, teams, locations, etc.

Participant

An employee in the Manage Employee section who has been made eligible for participation in a given plan.

Performance Factor

This term appears on the Results tab to indicate the degree to which an Org Unit achieved its target results. For example, a factor of .80 means the unit performed at 80% of goal. A factor of 1.25 represents 125% performance. A factor of 0.00 indicates the unit failed to reach Base level results and no value will be awarded under the plan.

Performance Rating

The numeric score assigned to participants on the Finalize tab (if applicable). The score may either impact the entire bonus value or a portion depending on way Individual Performance is being applied under the plan.

Plan Design

The section of the BonusRight system where you build out your plan.

Plan Name

The name you’ve given to your plan in Plan Specs.

Position

Term used to describe each employee’s role or job title in the company.

Preliminary Bonus

The calculated value of a participant’s bonus based on the company’s actual results, but before adjustments. The Preliminary Bonus first appears on the Calculation tab.

Primary Contact

The name of the person at the company who is responsible for administrative communications with BonusRight staff.

Primary OU

If you wish to create a plan that is organized by an Org Unit (such as a department), you will need to designate the employees’ Primary Org Unit. This is done on the Manage Employee tab.

Projection

The step in the Plan Design stage where you review employee bonuses before finalizing the plan.

Proration Settings

Term which describes how employee bonuses will be treated under various scenarios such as new hires, terminations, resignations, promotions, and salary changes. The system contains standard default assumptions. Depending on your subscription level you can override the defaults on either an individual or universal basis.

Reports

The section of the BonusRight system where you can view and print summaries and statements to be used to explain and communicate the plan to managers and employees.

Reserve

The dollar amount determined on the Budget page to be retained for special circumstances, exceptions, and extraordinary performance. Holding a reserve allows greater flexibility in plan operation.

Results

The step in Operations where you input actual performance values for the company and Org Units.

Set a Budget

One of two approaches to creating your plan budget. The other is Sum of Targets. It’s also referred to as the “top down” method. With SAB you start with your totalBonus Pool and allocate it among employees.

Structure

A step in the Plan Design stage where you review various plan components by individual participant. This is where you make exceptions to Grade level decisions on an employee by employee basis.

Sum of Targets

One of two approaches to creating your plan budget. The other is Set a Budget. It’s also referred to as the “bottom up” method. With SOT you start by identifying bonus targets for employees—the sum of which creates your budget.

Superior

BonusRight uses “Superior” to describe the highest desirable performance for the company. This reflects achievable but exceptional results. As a rule-of-thumb, companies should expect to achieve Superior profits once in every 5 years.

 

Target

BonusRight uses “Target” to describe the company’s expected performance for the plan year. This might be thought of as “Budget” level results (from a planning perspective). This is the level at which participants would earn their Target bonus value. As a rule-of-thumb, companies should expect to achieve Targets profits 3 out of 5 years.

Wages

Term used to describe the annual earnings to be used in the design and operation of your plan. You may prefer to use a different term such as salary, earnings, etc. You can indicate your preferred term in Term Definitions in the Settings section.