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:

Bonus distribution Explanation Payout consequences (examples)
End of period Bonus payout during the selected bonus period

Monthly (April): Payout in April

Quarterly (Q3): Payout in September

Half-yearly (H1): Payout in June

Yearly (2018): Individual decision (payout in 2019)

After period Bonus payout after the selected bonus period

Monthly (April): Payout in May

Quarterly (Q3): Payout in October

Half-yearly (H1): Payout in July

Yearly (2018): Individual decision (payout in 2019)

Distributed evenly over the period Bonus payout during the selected bonus period

Monthly (April): Payout in April

Quarterly (Q3): 1/3 in July, August, September

Half-yearly (H1): 1/6 from January - June

Yearly (2018): Individual decision (payout in 2019)

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.

Target-Targetagreement-Quarterly_en-us.png

 

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:

Target type Definition Example
Binary Target achieved or not achieved Sales target
Qualitative Not directly measurable Employee satisfaction
Quantitative Directly measurable Sales targets 

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.

Target-KPI-Targetdefinition_en-us.png

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.

Target-Bonus-Salary_en-us.png

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: 

Selected interval Example Bonus period
monthly March 2018 01.03.-31.03.2018
quarterly Q2 2018 01.04.-31.06.2018
half-yearly H1 2018 01.01.-30.06.2018
yearly 2018 01.01.-31.12.2018

 

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.

Target-Salary-Bonusvalidation_en-us.png

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

 

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