At-risk fees allow the user to calculate performance-based compensation for a supplier or relationship based on the final score of an assessment from a performance program. At-risk fees are fundamentally different from penalties and bonuses. These fees affect compensation in the period being evaluated. Penalties and bonuses are often implemented as service credits for periods following the period being evaluated.
At-risk fees are only available for performance programs.
Two levels of at-risk fees that can be defined include:
- At risk fees that apply to the overall outcome of the entire assessment.
- At risk fees specific to the performance within a single organization unit.
At risk fees are additive; i.e., total performance-based compensation is the sum of the global at-risk fee based on the overall score of the evaluation, plus individual organization unit at-risk fees based on the scores for each organization unit.
If the user must create a penalty bonus scheme, they can achieve this through a combination of at-risk fee definitions and the use of an administrative configuration, entitled “At Risk Payment Range.” This configuration feature is normally used to define discrete compensation amounts for “bands” of performance.
- 0% to 50% performance = 0% of at-risk fee compensation
- 51% to 80% performance = 50% of at-risk fee compensation
- > 80% performance = 100% of at-risk fee compensation
To implement a penalty scheme, simply specify a negative percentage for that particular band of performance. The at-risk fees that show up will then be a negative amount, indicating a penalty. For example:
- 0% to 50% performance = -100% of at-risk fee compensation
- 51% to 80% performance = -50% of at-risk fee compensation
- > 80% performance = 0% of at-risk fee compensation