Compensation elements in Workday serve as thecritical integration point between HCM compensation plans and Payroll earnings. To ensure that a car allowance plan is paid correctly through payroll, the compensation element must be createdbeforeit can be assigned to the allowance plan.
The correct process begins with theMaintain Compensation Elementstask, which is used to define the element itself, including its payroll characteristics and earning behavior. Once the compensation element is created, it can then be selected directly when creating thecar allowance plan, ensuring that the allowance is properly mapped to payroll.
Compensation Element Groups are used only to logically organize elements and do not create elements themselves. Additionally, administrators do not need to manually add elements to allowance plans through Edit Tenant Setup. Instead, elements are associated directly at the plan level during plan creation or configuration.
Options A, B, and C introduce unnecessary or incorrect steps that are not supported by Workday configuration best practices.
Therefore, the correct and efficient approach is tocreate the compensation element first using Maintain Compensation Elements, then create the allowance plan with that element, making option D the correct answer.
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