Salary administration and bonus administration are at the heart of compensation management, yet without validation of that data today, what you end up paying employees may cause trouble.
For example, your employees are looking at sites like Glassdoor and Indeed to determine what they should be paid. What are you doing, as a business, to validate what you pay, to employees and as a business?
You do salary administration to start off, with bonuses for key employees and achievements. When business is quite small, these can be handled simply. Yet to scale a business, moving beyond simple administration to validation – both in terms of measuring and ultimately managing employee compensation from a view to grow the company.
While the answer on how to do that is the subject for another post, the subject here is clear. Compensation management is more than just salary administration, it’s communication of value to an employee and to the business. Validation is not just in measuring, it’s in delivering the right pay to the right people at the right time.
Many companies take this for granted, which is why this basic intro is shared. While compensation management isn’t rocket science, the larger a company grows in employees and revenue, the more complex it becomes.
What is Compensation Management?
Every organization has a compensation plan, even if it’s not formally written. The goal of any compensation plan is to attract and keep qualified employees, who are motivated, and compensated, to achieve the goals of the company. The goal of compensation software is to execute that plan accurately, making it easy for employees of all levels to manage it.
Salary, bonus, and incentive administration are the core of compensation plans and software. While that sounds simple, in practice the complexity of bonus and incentive plans being accurately managed by multiple managers and senior executives is a challenge.
Compensation is more than the means to attract and retain talented employees.
Without the right compensation software, companies lose a competitive advantage for their biggest expense. Many companies crunch their numbers over a focused, 30-60 days each year. If the bonuses, overtime, merit pay raises, performance reviews, and even stock/equity compensation are faulty, the company falters. In the rush to finish, poor software may require manual adjustments and updates at the last minute, instead of ensuring that the data is compliant and accurate each step of the way.
Yes, everyone has a compensation plan; the ones who have it in writing are usually more successful.
Even if your compensation plan is not formally structured and written, for employees the result is written on their pay. Some think, maybe Excel spreadsheets for compensation are enough, though many companies fail to even ask this question of how to manage the greatest expense of most businesses, paying your people.
Many waste time, money, and lose employees because they don’t understand basic compensation.
The biggest waste is management time, and employees lost because of poor compensation plans and management. With growth, new compensation challenges arise for the company and the employees who want to be recognized and paid fairly for their contributions to that ongoing growth.
Why Compensation Management?
Here are the 3 Keys:
- Engage employees and motivate them with a sound compensation plan, with compensation growing based on contributions and results generated for your company.
- Compensation stimulates employees to improve performance, with rewards based on compensation metrics and performance reviews to encourage positive activity.
- Done well, compensation helps define a career path for your best employees, while helping everyone understand the value they deliver to the company, ways to improve, and rewards for reaching goals.
In order to achieve this goal, organizations are moving from a world driven by many spreadsheets to a singular software that anyone, even those who don’t excel at Excel, can use easily. After 10 years of development in big enterprise companies, you can now own compensation software for a fraction of the original price.