The compensation your staff receives for working for you is the “reward” they get for spending their time and energy to meet your organization’s goals. You need to be able to quantify the contribution of your employees and compensate them appropriately to keep them motivated. Doing so is the basis of compensation management. Compensation management also involves facilitating the systems, processes, and procedures used in compensating your employees.
Use your newfound knowledge of compensation management by comparing the Top Talent Management Software side-by-side
What are the Objectives of Compensation Management?
The fundamental objective of compensation management is to pay your employees a fair wage that’s proportional to their contribution to your company’s bottom line. However, that only scratches the surface. There are a few other key objectives of compensation management to keep in mind:
Recruiting Quality Talent
A key goal of compensation management is to recruit appropriately qualified and experienced talent. Simply recruiting this talent isn’t enough, however; you need to get them onboard to help improve your company. The best talent is typically lured by a combination of the opportunities available in the position and the total compensation. Total compensation goes far beyond just a salary. It also includes benefits such as insurance and retirement, as well as perks like telecommuting on Mondays.
Retaining and Rewarding Your Staff
In today’s competitive age, it’s rare for someone to spend their whole life working for a single organization. Even still, you need to ensure that you don’t lose your employees to the competition, while retaining your staff for as long as possible. It’s important to pay your employees a fair market value depending upon their qualifications and experience. Compensation can also comprise of a fixed component (their salary) and a variable component, (a performance-based bonus).
Enhancing Motivation Levels
An essential objective of compensation management is keeping your employees motivated. An employee who knows that he or she is fairly compensated for the work they put in is more likely to be productive and stay committed to your business.
Adhering to Regulations
Proper Compensation Management also makes sure that compliance with federal regulations like the Fair Labor Standards Act. Non-compliance may lead to unnecessary litigation, not to mention distrust among your employees.
Maximizing Your ROI
Compensation Management can be used to create a compensation plan to help you stay within your budget while driving productivity through motivational tactics like pay-for-performance.
Compensation Management Software
The use of compensation management software helps to achieve the above objectives without putting too much burden on your HR department. You should choose compensation management software that you can customize for your business rules and help in prioritizing the objectives that are of importance to your organization. Some features include:
- Planning of compensation and salary
- Self-service employee access
- Reporting and budgeting
- Support for compliance adherence
- Administration of incentive programs
What are the Benefits of using Compensation Management Software?
One of the primary objectives of managing employee compensation is ensuring that your employees get paid the correct amount on a regular basis. To ensure this is done, your business needs to keep accurate and up-to-date records. Businesses may consider storing compensation-related data in Excel spreadsheets. Doing so is not only inefficient, but insecure as well. The use of compensation management software is helpful in increasing efficiency. But that’s just scratching the surface of the benefits these systems provide:
Storing employee compensation information in a single repository of data reduces the chances of misplacing the data. Since the majority of systems need a password to grant access, there’s a lower risk of sensitive information being accessed by unauthorized people.
Improved Efficiency and Accuracy
Using multiple spreadsheets to track and calculate the compensation of your employees can easily lead to errors. Your HR department saves time, effort and energy if the compensation details of your employees are stored in one place.
Having a compensation management software helps employees get details about their past and current compensation. Misunderstandings between employees and their managers about compensation are minimized since all stakeholders can check the relevant aspects of an employee’s compensation plan.
Better Insight in Company Budget and Compliance
The majority of compensation management software monitor employee payouts and store this information for access by authorized personnel. Business owners and managers can use this data to view reports and make sure that the organization stays within budget. Your HR department can also ensure adherence to federal regulations and have access to a full audit trail of past payments. The audit trail can be very helpful to show the authorities that you are complying with regulations.
What features of Compensation Management Software Should You Look Out For?
If you’re looking to select a robust compensation management software, these are some of the essential features to be aware of:
Facility to Segment Data
When evaluating compensation management software, the first feature to look for is whether you can segment data effectively. Managers should be able to segment data by departments, branches, organizations, locations, etc.
Easy to Access and Secure
Stored data should be easily accessible by managers and employees. At the same time, the system should have layered security to make sure that individual employees can only access their data.
Managers and business owners should be able to run on-demand reports of every kind. At a minimum, some of these reports should be reports relating to a single employee or department; budgetary allocations for each department; and quarterly/annual reports of compensation paid out by employee, department and across the whole organization.
Generation of Compensation Statements
Managers should be able to generate compensation statements for individual employees. These statements can be either general summary statements or more comprehensive statements detailing perks, bonuses, and incentives.
A robust compensation management software must offer you the ability to automate workflows. It should also have a notification system and facilitate effective transfer of information. In case you need any approval for adjustment of incentives, an automated workflow routes information to the appropriate person and notifies him or her of the same.
How Should You Shortlist Compensation Management Software?
The first step is to meet with your HR department to conduct a needs analysis and prepare a comprehensive requirement specification document. List your “must-have” and “nice-to-have” features. Then assess the various vendors who offer compensation management software. A good set of criteria to use in the shortlisting process is:
- Number of years in business
- Features of the software
- Deployment model: on-premise or cloud-based
- Ease of integration with your existing software
- Pre-sales and after-sales support
- Cost: Up-front and recurring
The final step before making a decision is to evaluate a trial version of the software. The evaluation should be carried out by your HR department with the assistance of your IT department. Doing so ensures that any possible integration issues are assessed before implementation.
Regardless of the size of your company, selecting a robust compensation management software is important to streamline your compensation management process. This makes sure that your HR processes is streamlined and employee motivation and engagement levels are high.