Important facts, considerations, and limitations of the Variable Pay field in Compensation.
Variable Pay: Definition
In Lattice, Variable Pay has the following characteristics:
- Variable Pay is a fixed dollar amount (not a percentage or auto-calculation) assigned to employees.
- The sum of Base Pay + Variable Pay is labeled On Target Earnings (OTE).
- This sum of Base Pay + Variable Pay is also used to calculate compa-ratio, and therefore compensation band placement.
Within a compensation cycle:
- The sum of all eligible employees' Base Pay + Variable Pay is shown as the Eligible Employee Pay when setting a budget.
- Any changes to Variable Pay will come out of the Total Raise Budget for the cycle.
- Any Target Increase or Guidance rules are applied to both Base Pay and Variable Pay. For example, a flat 4% guidance will show up as +4% to Base Pay and +4% to Variable Pay. There is no way to apply a different increase guidance across Base Pay and Variable Pay.
Note: This only applies to Guidance as it is shown to recommenders and approvers in the compensation cycles. Recommenders and approvers are always able to submit different Recommendations for Base Pay and Variable Pay. - Variable Pay does not include any calculations and does not display an indication of estimate/target vs actual/payout. This is unlike a Bonus Plan payout (which can have a different target amount and payout amount).
Use Cases: When to Use Variable Pay
- Countries with 13-month pay cycles: For employees in countries with a 13th month pay, this extra month’s pay can be held in the Variable Pay field in Lattice.
Limitations: When Not to Use Variable Pay
- Commission payouts: It is not recommended to store commission payouts in the Variable Pay field in Lattice. Commission payouts generally come from their own pool of funds (often pulling a portion of sales revenue) separate from the finance budget for employee salary. Because Variable Pay is grouped under the same budget as employee salary increases in compensation cycles, this is not an appropriate place to store commission pay.
What if I want to track commission payouts in Lattice?
Lattice’s compensation management tool does not have a feature intended for tracking and paying out commission. There are specific tools that exist outside of Lattice for managing commission pay directly.
Reach out to customercare@lattice.com or your Lattice Relationship Manager, and we can connect you with partners to guide you through managing commission pay!