What is Compensation Plan Software and Why You Need One

Although unreal, studies have shown that almost 75% of employees quit companies that do not have a proper compensation plan in place. This is because employees, even the top-performing ones, are bound to leave once they realize that they’re paid way below their pay grade.

Thus, for most companies to acquire, retain, and – most importantly – grow talents that can help their business grow, a good compensation planning software is not a need, but a must.

Continue reading to learn more about what compensation management software programs do, how they can potentially help companies with their total compensation packages, and most importantly, what the ideal standards that companies should look for in one are.

What is a compensation tool?

Compensation tools are software programs used by HR professionals and managers alike to help streamline an organization's compensation strategy and ensure competitive compensation packages. Although payroll can be done manually, using online tools to track compensation elements can help streamline the process further.

Additionally, compensation tools also provide companies with real-time data of their compensation plans, which can help them make informed compensation decisions. There are plenty of these tools easily available online, but the ideal compensation management software integrated with any company’s already existing CRM systems ensures a smoother transition.

What is compensation plan software?

While compensation management platforms simply offer a way for companies to oversee their payroll processes, compensation plan software offers to automate the entire process and provide employees with instant access to salary surveys, which can provide help with managing employee compensation. That includes everything from payroll, bonuses, and benefits, on top of ensuring that every employee gets a fair and competitive price for their work.

Similar to compensation tools, the ideal compensation plan software should also be easily compatible with the company’s existing systems. This ensures a smoother transition, along with providing companies with a more flexible salary structure as well.

These software programs also provide transparent compensation practices to companies, especially since newer ones can track market data which can provide their employees with competitive pay. This, in turn, can help to ensure that every employee is fairly compensated, allowing for a company culture that's rooted in growth.

How can compensation plan software help a company?

Simplicity is the name of the game when it comes to compensation plan software. Usage of these tools can ease every HR professional’s burden when it comes to managing their compensation process, along with helping them with performance and compensation management. This can help them make informed decisions and provide employees with fair pay based on global compensation standards.

As mentioned above, these systems can also help provide companies with an easier time with their payroll, ensuring that every employee gets paid significantly faster, which means that HR staff can focus on administrative tasks instead. Having an easy to configure system that’s easily compatible with any payroll provider also helps save time as well and provides the company with valuable compensation decisions that can help them succeed.

What should the right compensation planning software have?

Here are some of the checklists that companies should use to choose the best compensation benchmarking tool for their business.

• Compatible with most tools

  A compensation software that’s compatible with most tools – even the more antiquated ones – is a must-have for companies. This is because up to recently, 51% of American companies rely on manual data entry, with 19% of companies facing payroll errors.

  Thus, the best compensation management software should be compatible with most payroll systems and payroll tools most companies use, ideally Microsoft Excel and other Windows Office tools.

• Easy collaboration with everyone involved

  Collaboration is a must when it comes to HR professionals. Thus, the right compensation management software should be a tool where everyone involved can collaborate seamlessly. It should also be easy to navigate as well, to account for the technological differences as well, especially when tackling more complex pay structures.

• Provide accurate computations

  Payroll errors happen in 20% of companies, and it can cost them an average of $298 in compensation expenses. The right compensation management software secures accurate computations to minimize risks and ensure that their employers won’t miss out on their deserved pay.

  It could also be argued that providing accurate computations also allows for better pay equity for employees as well.

• Align and communicate rewards

  The right compensation analysis tool should not just provide payroll services but also help communicate rewards and merits to every employee. After all, 60% of U.S. employees appreciate if their employers reward employees for a job well-done.

Having a system that can simplify and personalize employee bonuses is also a nice plus as it allows for a simpler process in the long run as well. This ensures positive employee engagement and provides employee morale, which in turn boosts better employee satisfaction in the long run.

FAQs

Here are some frequently asked questions about compensation plan software.

What is compensation management software?

A compensation plan software is a program that’s specifically designed to help HR professionals streamline the entire payroll process by providing them with data-driven insights on salary data that can help them make informed decisions.

It can also include the following:

• salary planning

• compensation analytics

• sort employee data to create compensation bands

• compensation plans

• salary range computation

• ensure pay equity

• set a good pay benchmarking strategy

• budget management

• oversee pay disparities

• provide compensation data

• give companies compensation strategies

However, more sophisticated compensation management software helps its users to plan employee rewards along with applicant tracking systems that can help companies with their payroll strategies moving forward as well.

How do you create a compensation plan?

To create a compensation plan, HR representatives should consider five steps:

1. Create an outline based on business objectives

2. Rank the jobs by superiority

3. Make pay ranges that correlates to the superiority

4. Identify the salaries and hourly rates

5. Develop a communication plan

It should be noted that to create a compensation plan, learning a company's pay guidelines and past compensation history should also be noted. This is to ensure that the total rewards provided to every employee still falls under the organization's total rewards strategy.

What are the 3 Ps of compensation?

The 3 Ps of compensation are the following:

• Pay for Performance Management

• Pay for Person

• Pay for Performance