When it comes time to calculate compensation for employees, many organizations are faced with an arduous and daunting process. Between gathering information from multiple sources, consolidating it into a format which can be easily accessed and understood, and calculating merit and other pay increases, the task of managing compensation can prove to be costly and time-consuming. Adding in variables such as numbers and types of employees, currency conversion across various regions, and multiple kinds of merit matrices and considerations (including pay-for-performance, proration, and compa-ratios), the process is complicated further. Managing this information in a spreadsheet program or other similar documents can eat away at productivity and cause undue stress for those employees who are tasked with collecting and managing compensation data. For these reasons, utilizing some kind of compensation management software can aid in saving an organization time and money by streamlining this process.
For many organizations, the compensation process involves HR gathering information from various managers about those working under them, usually in a spreadsheet program. This means that not only do they have to wait for each person to send them the required data (which can lengthen the amount of time it takes to calculate compensation), but it means that sensitive information (such as salary, social security numbers, and so on) is being sent unsecured through email, making such data extremely vulnerable. Furthermore, the more people involved in this process, the higher the probability for some kind of calculation error, which can cost more time by requiring the information to be combed for these errors.
Compensation management software can alleviate many of these problems by creating a single environment for relevant information and performing all necessary calculations behind-the-scenes. Managers can enter information on their direct reports (including performance ratings) into the system, which will in turn allow it to be instantly accessed by HR, both cutting down on the time it takes to receive the information as well as ensuring the security of sensitive data. The software can also take into account the various compensation systems used for different classes of employee, removing both the amount of time it would take to calculate merit increases and bonuses, as well as eliminating user input errors which may arise. It can also make all necessary currency conversions, aiding those companies with operations in multiple regions.
It can also show employee performance at-a-glance, and compare their pay to the industry standard for that position. This can not only ensure that employees are being paid relative to the value they provide to the organization, but also ensure retention of valuable, hard-working employees. Any adjustments made to compensation can be tied to an overall budget which an organization is willing to put towards increases, allowing users to keep track of how much can be put towards compensation increases and incentives, with the totals updating in real time. Should any discrepancies arise due to variables passing the maximum threshold set by the organization, the software can immediately alert users to these discrepancies. This allows them to easily locate errors as well as determine exceptions (such as in the case of a particularly valuable employee).
The end result of implementing a compensation management system is a decrease in the amount of time required to collect, analyze, and deliver compensation data, resulting in increased productivity for an organization. It also allows them to track how much is being spent on compensation, and to what end. This makes it easier to determine what is or isn’t working in terms of their compensation strategy, and to tweak their strategy accordingly. What was once a complicated and mystifying process becomes clear and concise, allowing organizations to be better informed and thus empowered.