Target Agreements (KPIs) and Linking to Bonus

This article covers the setup of agreed targets and their automatic linking to bonus payments. The setting of targets, so-called KPIs (Key Performance Indicators) in Personio offers the following key benefits:

• A record of monthly, quarterly, half-yearly or yearly employee targets
• Definition of any number of binary, qualitative and/or quantitative KPIs
• Automatic calculation of flexible salary components based on agreed targets

General Settings 

Begin by navigating to the General tab under Settings > Performance and specifying when employee bonuses are to be paid out. Personio provides three options: at the end of the period, after the period, or distributed evenly over the period. See what these each mean for the payouts in the table below:

Note that the General settings for the bonus payout become irrelevant when the interval is set to "yearly." With yearly targets, you can decide individually, in which month of the following year the bonus payment shall be made.

Setting Up Targets

Use an employee's Performance section to set up monthly, quarterly, half-yearly and yearly targets with any number of KPIs. To set up an agreed target, select the option Target from the drop-down menu on the right.

Defining KPIs

Define as many of your own KPIs as you like, or choose from existing KPIs and add them. Personio offers the following three KPI types:

Note that floating-point numbers cannot be used when defining KPIs. For example, if you are using the quote-to-close ratio with values between 0 % and 100 %, enter a target of between 0 and 100 and not between 0 and 1. Values such as 0.25 or 0,25 are not permitted.

Complete the process by freely defining for each KPI whether and to what extent it should be considered in the bonus calculation for the selected period. If desired, set up feedback meetings to measure the KPI progress. See this article for information on how processes for target agreement and target management can be designed.

Targets can also be exceeded, making it possible for employees to achieve more than 100 %.

Linking the Bonus Calculation to Salary Management

Based on the targets, you can activate performance-based bonuses for your employees that are automatically calculated. To do this, go to the employee profile and select Salary > Edit > Add bonus. Enter the target bonus amount for the desired period, choose the interval, and enter the date from which the bonus should take effect. Click on Save to complete the process.

For the automatic bonus linking to work, the chosen target interval and the bonus period must match. Also make sure that the Valid from date is at the start of the bonus period.

Valid from: For an automated mapping of the targets created with the bonus payout, the following points should be noted:

• Bonus period: The Valid from date must be set to no later than the first day of the bonus period.
• Calendar year: Intervals always refer to a calendar year; specific individual settings are not possible.

Examples: 

Confirming the Bonus Payout

After a one-time confirmation, the payout amount is displayed in the Bonus column of the salary overview. Depending on your settings, this occurs at the end of the bonus period, after the period, or evenly distributed over the period. For further information, please click here.

If your employee is to be paid an amount different from the calculated bonus, you can adjust this manually and click Confirm.