CompLogix Insights

The Total Cost of Manual Errors in Compensation Management

If you are responsible for managing the compensation and benefits for a company of any size, you are well aware of the impact a simple, misplaced decimal point may have. Formula errors in a spreadsheet or simple data entry mistakes can create hours of additional work and create negative downstream effects such as employee dissatisfaction and even attrition.

Even in this digital age, there are plenty of HR professionals who still use spreadsheets. A 2021 Oracle State of HR Analytics report finds as many as one-half fall into this category. For those still managing comp and benefits via spreadsheet, errors are inevitable –  if it hasn’t happened yet  – it really is just a matter of time.

Operational Risk and Manual Errors

The term operational risk is often used in the financial industry, but it applies to every business that stands to incur losses because of failed internal processes. Anytime there is a breakdown in the manual processes that handle employees’ compensation and benefits, some kind of loss will inevitably occur. In fact, current research finds nearly 90 percent of spreadsheets contain errors and one-half have material defects that impact the accuracy of the resulting data. 

And those errors can really add up. Lost time is just a part of the loss equation that comes with having to correct manual spreadsheet errors. There can also be financial losses, for example those that result from inaccurate payroll or incentive program disbursements. Perhaps the biggest loss is in employees’ confidence in your HR Team and company to manage their pay and benefits appropriately. Once trust is lost, it is hard to earn it back. People do not appreciate having their pay or benefits poorly managed.

Manual Error, By the Numbers

If the cost of a SaaS-based compensation management solution is keeping you from ridding yourself of troublesome spreadsheets, the expense becomes much more reasonable when you consider the actual cost of spreadsheet errors. 

Take for example a financial investment firm that relies on manual processes and spreadsheets to manage incentive payments for its investment bankers. According to Gartner, manual compensation processes result in errors between 3-8% of total incentive payouts and these  inaccuracies can add up significantly over time. If this company pays out $4,000,000 in bonus compensation every year, they may be incurring costs from errors that range between $120,000 (3% error rate) and $320,000 (8% error rate). Additional costs of manual error are found in overpayment costs, administrative costs, attrition, and dispute costs. 

Enable Your HR Team with a Configurable Solution

If you are considering a new compensation management system, you probably already understand its limitations. Imagine a world where your HR team doesn’t have to be bound to the constraints of multiple spreadsheets to manage compensation and benefits. Think about having reports available at a glance and the ability to flex and adjust your comp and benefits as offerings change and your company grows. Think about happier employees and getting to go home on time each night. It’s hard to put a price on that.

CompLogix’s Compensation Management Solution changes the way you manage your company’s pay programs — replacing complex manual methods with streamlined automation that saves time and resources. Because our solution is configurable, nearly everything from the type of pay program accommodated to the organization of data is customizable to your needs. And, it can work alongside your existing HR software. Contact us today for a complimentary demo.

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