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Should you Hire a Compensation Employee or Buy a Compensation Software?

Now that your business has reached a certain level of success you are faced with a challenge. The challenges of managing employee compensation on your own or by your HR representative has become too difficult and too large of a task, and you need someone or something to do the work for you. You have two options: hire a compensation employee/manager or purchase a compensation software service. The choice can be difficult and there are a lot of factors to consider to make the right choice for you and your company. So, let’s get into the details of both options to see which makes the better choice.

First, let’s define these two entities to get a basic understanding of what each of them do and how they work. A compensation manager or compensation professional is an in-house employee that you higher to handle of your compensation needs. Their job is first to create a compensation system to pay all of your employees and, second, to track and manage all of your employees’ compensation packages, including their bonuses and benefits.

A compensation software does all of these same things, except it is not an employee that you hire it is a service that you purchase. Compensation software programs are web-based programs that manage all of your compensation needs. They have a database of all of your employee’s specific compensation plans, where you can also track an individual’s work goals and performance rates. All of this is done through it’s own cloud-based application that tracks and manages all of the data on its own.

Although both the product and the employee do the same thing, they do these in very different ways. Next, let’s analyze both a compensation manager and compensation software using four different criteria: cost efficiency, workload, accessibility, and accountability, to get a well-rounded idea of the pros and both a compensation manager and compensation software.

Cost Efficiency

Compensation managers can cost a business serious money. Their salaries can range anywhere from $66k a year up to $104k a year. Although that is quite a large range, you have to consider yearly raises, bonuses, and other benefits that can raise that baseline salary higher and higher each year. It can be incredibly expensive to have a compensation manager, or potentially an entire team if your business is big enough, to track and manage your compensation needs.

Compensation software, on the other hand, will not have the same expense. It, unlike an employee, does not have bonuses and benefits that you need to keep track of. Instead, when purchasing a software, you are doing just that: purchasing. The price for compensation software packages also ranges, but this is because these software packages are tailored to the individual companies and address their specific compensation needs. There are no other surprise costs that a compensation manager might have.


Obviously, there is going to be a large difference on the amount of workload between a compensation manager and compensation software. At the baseline, a compensation manager is going to be working 8 hours a day, 5 days a week, 52 weeks out of the year, which surmounts to a whopping 2,087 hours a year. And, according to the United States Department of Labor, “about 1 in 3 [compensation managers] worked more than 40 hours per week in 2016. They may work more hours during peak times to meet deadlines, especially during the benefits enrollment period of their organization.” In total that’s over 2,000 hours of work solely based on compensation management for a single employee.

Additionally, a compensation manager has a lot of duties based on their title, which can make the job very stressful. For example, a compensation manager is not only responsible of monitoring all compensation packages, but they also have to design the entire system that the company uses. This means that every year, or even every quarter, when it is time to give out raises and bonuses, the compensation personnel is swamped with work.

On the other hand, using a compensation software is considerably less work. First, there is no individual whose sole job is compensation management. Therefore, you can dedicate that job space to fill another position that will help your company grow. In addition to that, any extra time that would be taken up during the compensation planning season with a compensation manager would not happen with the software. If there happen to be any problems, the customer service team at your compensation software provider will handle it.


One of the great benefits to compensation software is that you can access it anywhere. Since the program is web-based and stored on the cloud, all you need is a web browser, and you can retrieve all of your compensation information. You do not have to worry about waiting for your employee to finish working on that one spreadsheet or figure out the new merit bonus equation; instead, you will be notified exactly when your data is ready, and it updates in real time. So you never have to wait too long to access any of your compensation data.

Contrastly, a compensation manager might not always be as accessible as your think. For example, when they are in the middle of making and working on documents, you will not have the most updated compensation data. This would not be a problem if it were a small amount of time, but when it is up to a person and not an algorithm to do some of the intricate math involved in compensation planning, which could potentially be problematic on the financial side of your business. There will be times when your compensation data is simply not accessible to you because you are waiting for your compensation personnel to finish their work.


To put it simply, a piece of software cannot call in sick days or go on two week vacations. In comparison to an employee, a piece of software does not have the same amount of risk or unpredictability. The piece of software will always be there for your company, which, no matter how great of an employee, can never be truly possible for a human worker. There will inevitably be personal matters that come up or have days where they are not as productive as others. These are concerns that absolutely will not occur when using compensation software.

Additionally, and more importantly, it is far less likely for a software program to make any errors. When a compensation employee has to work with spreadsheets all day everyday, the will make an error or two in the process; it would simply be impossible not to. When your company does not have to rely on spreadsheets and can instead operate with a tested product that will give you accurate results every time that you use it. Compensation software will always deliver results in the time frame that you need and to the quality that you deserve.

All in all, there is a surprising amount of differences between a compensation employee and a compensation management software. When comparing cost efficiency, workload, accessibility, and accountability, compensation software is cheaper, faster, and more reliable than hiring a compensation manager. Using the software ensures that all of your compensation needs will be met exactly when you need it, and that information is easy to understand and adjust if necessary.

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