Compensation management is an integral process in any business and should be seen as much more than simply paying employees a set rate for an agreed-upon workload. Employees depend on their income to support their lifestyles and families. As such, compensation management can play a big role in acquiring top talent, keeping employees satisfied, and ultimately in keeping employees.
What Is Compensation Management?
Compensation management is an HR process that involves planning and managing any type of compensation that a company pays to an employee in exchange for their work. While compensation management does include pay, there are also benefits, bonuses, PTO, and more. The total compensation package is important to employees more so than the salary alone. What other compensation a company offers can make the difference between top talent hiring on and passing for other opportunities.
Objectives of Compensation Management
The major objective of compensation management is for HR to create a strategy for compensation that will attract top talent to the company. In addition, compensation management can help retain employees and reduce turnover. Payroll and compensation are major factors that employees consider when deciding whether or not to accept a job offer or whether or not to stay at a company.
High turnover is bad for the company. Not only does it mean that employees are less experienced because they’re newer to the company, but turnover also costs companies a lot of money. One of the objectives of compensation management is to reduce turnover by strategically offering the right compensation to employees.
Attract Top Talent
A company is only as good as its employees. The more highly skilled your staff members, the more profitable your company can be. To this end, compensation management can be used to help attract top talent to your company.
Reflect the Current Job Market
It’s important for companies to offer compensation that reflects what the current job market is offering. If employees could make a lot more money at a different company, then many of them will leave. Paying attention to current market trends can help your company keep employees productive and motivated by offering them the compensation that their job is worth.
Boost Employee Motivation
Employees are more productive and motivated when they feel valued by the company they work for. Compensation in HR management will help keep your employees feeling appreciated. If employees aren’t compensated enough, they won’t feel motivated to work as hard. Up to a certain point, you get what you pay for. Better compensated employees will be more motivated to work harder for the company than those who aren’t compensated as well.
Benefits of Compensation Management Software
Using software to manage employee compensation has many benefits. Employee compensation management systems can help reduce errors as well as save HR staff a lot of time. Many processes can be automated and data can be synchronized across multiple systems. On top of that, many of the best HRIS software solutions with compensation management features also offer self-service portals for employees so they can view their compensation details and update their own personal information.
Organize Variable Pay
When employees are paid a range of salaries based on seniority, merit increases, and job titles, it can be difficult to keep everything organized. Most HRIS software solutions allow you to create employee profiles that will allow you to see an employee’s hourly rate or salary and start date at a glance. Being able to simply view all employees’ compensation in one place may help you to spot discrepancies and potential opportunities.
Use Performance Management Tools for Decision-Making
HRIS often come with robust performance management tools that can be used to capture behavioral information and performance data. This information can be attached to the employee files and linked to peer-to-peer reviews and self-assessments. Having all of this information in one place can make it much easier to make decisions regarding merit increases and other issues affecting compensation.
Adjust Compensation Instantly
After you have decided to adjust employee compensation, HRIS can be used to plug that information into many different areas where it may be pertinent.
If an employee’s role has changed, they may require different permissions and job codes, payroll should be adjusted to reflect salary changes, and benefit offerings may change. HRIS may automatically adjust these or may require just a few clicks to make the necessary changes.
Improve Pay Transparency
Pay transparency is an issue that has come forward in different ways in recent years, with many employers seeing the benefits in sharing pay rather than hiding it. A HRIS can be used to effectively communicate base salary standards and raise opportunities in a way that is fair and open for all employees.
By sharing succession planning information and linking it to training and development opportunities, employees can even see where they are and where they have the potential to go within the company. By allowing employees to see these possibilities and how they link to potential salaries, employees get a true view of their advancement opportunities – which may help them to envision their futures.
Use Alerts to Spot Errors and Issues
It may be possible to set up HRIS to flag potential errors and problems with compensation. If an entering error places an employee at a higher salary then was intended, using alerts can help to mitigate the problem before the employee is paid at the erroneous rate or has to deal with the disappointment of being returned to the correct rate. Conversely, alerts can save employees from accidentally being paid less.
Additionally, alerts may be set to make you aware of situations that could be seen as unfair or even discriminatory. Reporting could show that a disproportionate percentage of employees of a certain demographic are over or under a certain rate regardless of seniority. This could allow you to review the situation in more detail to identify and correct the problem before it becomes a legal issue.
By using your HRIS for compensation management, you can optimize your human capital management using tools that are already at your disposal.
Is your company looking for a HRIS to manage employee compensation? Matchr can help you find the software vendor that will best suit your needs. Visit our HRIS software match page to start your search.