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Pay for Performance

Today we are going to explore a feature that combines two interesting areas from Human Resources processes: compensation and performance. In this article we will discover the magic within Dynamics 365 Human Resources and Pay for Performance functionality.

The main reason why Pay for Performance exist is for those cases where organizations want to combine employee performance to salary increases. Keep in the back of your mind that Dynamics 365 Human Resources does not provide Payroll capabilities, but that's a story for another post.

Let's go through the configuration and see the final result.


Create a Performance Plan

Log into Dynamics 365 Human Resources.

Go to Compensation Management.

Scroll down to Related information tab and search for Pay for Performance - Performance plans.

From the top select New and complete as shown below.

First step: Completed ✔️


Create Performance ratings

In the Compensation Management workspace, scroll down to Related information tab and search for Performance ratings

From the top select New and create the performance ratings, see examples below

Second step: Completed ✔️


Create a Pay for Performance allocation

In the Compensation Management workspace, scroll down to find Pay for performance allocations.

From the top, select New and:

  • Enter the Name

  • Select the Performance plan

  • Select the Department

  • Select the effective and expiration dates

Depending on the compensation plan, select either Fixed pay matrix or Variable award matrix. From there the Allocation matrix form will open and you can configure the elements. The key in the following configuration is to enter the percentage in the Performance factor column, this will be crucial.

Fixed pay matrix, the config has already been done.

Variable award matrix, same as the fixed pay matrix the configuration has been executed already.

Third step: Completed ✔️


Enable Pay for Performance

In the Compensation Management module, go to Compensation process.

Select New from the top and complete the name, process type and dates.

After the previous configuration, select Setup from the top.

A new tab will open with the following screen. Complete the plans configuration and make sure that Pay for performance is enabled. After that select the compensation action that will be involved in the process. See example below:

Fourth step: Completed ✔️


Rate a worker

Go to Personnel Management

Go to Links and then select Workers

From the list, select the desired worker record, and from the top - under Compensation - select Performance.

Rate the employee accordingly creating a record from the top selecting New.

Save and go to Home again.

Fifth step: Completed ✔️


Run process

Go to Compensation process again, and select the process you want to execute. From the top select Run process.

A new tab will open, select the desired parameters and then Ok.

The process will take a couple of minutes, find a screenshot of how the process results look like. Select Employee results.

The following page will load. In this case we will search for Julia Funderburk.

In this case we will only have results for Fixed compensation plan. You can see how the system is giving us a recommendation of increase based on the parameters defined before.

Under Status you can either Ignore or Approve the results. I will proceed approving them.

The status will change from Created to Approved.

All steps completed! ✔️✔️✔️✔️✔️


Verify worker compensation

Before closing the article let's take a moment to verify the worker compensation record.

Everything seems to be working fine!


Official Microsoft documentation: Key tasks: Pay for performance | Microsoft Learn. Keep in mind that it might be some feature naming that are no longer valid as Dynamics 365 Human Resources has evolved since the article was published: 29.11.2021, that's mainly why I'm doing this articles with updated information and screenshots :)

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