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Compensation Management Software – How To Automate Short & Long Term Incentive Administration

Complex compensation programs are a popular method to increase productivity as well as employee retention.  Tracking the complexity of all the different pay programs in an organization is a tough process, and is becoming more and more difficult.  Many short and long term incentives have non-monetary values, which adds complexity to the tracking process.  The days of simple bonus programs and merit increases are long gone.  A recent study indicated that 75% of organizations with 1000-2500 employees use spreadsheets to manage their compensation processes, and 90% of them are dissatisfied with this method. This is because spreadsheets are a manual process, which is time consuming, labor intensive and highly prone to error.

When incentive plans are managed through spreadsheets, getting a clear picture of the payout results is difficult. Compensation professionals managing these programs are looking to reduce administration time and errors by using a compensation management system.

Compensation management systems come in the form of a packaged compensation management software or through a custom system that automates the entire compensation planning process.  Typically organizations with more than a few hundred employees quickly outgrow a packaged, or out of the box type compensation solution.  Packaged compensation programs will typically help with basic bonus allocation as well as merit increases.  A custom compensation system helps to automate all of the small differences in compensation programs from each division, location, country, etc.

Here is what automation of short and long term incentives administration involves:

  • Data collection: To calculate incentives, data must be collected regarding performance results along with the information of employees eligible for variable pay. Performance results can come from a performance management module or other administrative systems like a CRM.
  • Calculating incentives: Once configured the system will automatically calculate all the incentives and update budgets if applicable.
  • Payout distribution: Once approved by HR, the system automatically creates individual comp statements for the employee to review
  • Workflows: Automatic workflows prevent the hassle of tackling communications through email or phone calls and also automate the approval process


Please feel free to contact us for additional information on compensation management and administration.

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