01 Apr Ten Ways to Tell If It’s Time for Compensation Planning Software
Compensation is a key ingredient in the success of any business. Employers are well aware of the importance of compensation….being able to hire quality employees, keeping and motivating top talent.
At a certain point, many employers find the planning of compensation to align with the company's goals gets overly burdensome. Having proper tools to help automate the tasks associated with planning compensation can add value for employers. The compensation plans involved might be salary adjustments and merit increases and other bonus or incentive plans.
How do you know if it is time for an automated software solution for compensation planning to replace tried-and-true Excel Spreadsheets?
Consider the following list of ten items to help determine if software can add value to your compensation and rewards program. Software can usually address these requirements more easily than spreadsheets. Of course, a higher number of these items which are desirable, the more valuable a software solution becomes.
- Calculating Awards. Do you want to use different business factors to determine the level of a person’s merit increase or bonus? For example, the results of a department and/or the company’s overall performance might influence an associate’s award. Sometimes, employers want to consider a variety of such factors in computing the increase or award amount.
- Manager Discretion. Some employers like to calculate a range or guideline for an increase and then allow managers to make the final determination of the award amount within that range. The belief is that the manager knows the person working for him or her best and should have the final say on the level of a reward. This practice also has the benefit of giving managers greater insight into the compensation planning process.
- Eligibility requirements for participating in compensation plans are challenging to manage manually. For example, are employees in specific job categories eligible while others are not? Does a person have to be in a specific job for a period of time to be eligible for a bonus or increase? Software can easily take care of these rules and make sure properly eligible associates are considered in the plan.
- Pro-ration. Do you want to pro-rate award amounts based on the number of weeks or days employees have been in their position during the period covered
- Maintaining salary within established ranges. Employers often have established salary ranges to make sure all employees are being paid in the proper range for their job.
- Performance Ratings to influence compensation. Is a merit increase or bonus based on the associate’s performance? If so, what amount is paid for an Outstanding Performer versus an Average Performer?
- Budget. What is the budget for the merit or bonus plan – and how is it to be applied? Are there different budgets for different departments?
- What is the base amount for calculating award amounts? Is the basis for an increase the annualized salary? Salaries adjusted for other items? Is there a formula used?
- Do you want to compare salaries to available market data? Perhaps there is a desire to use calculations such as Compa-Ratio or Range Penetration to measure how salaries compare to benchmarks.
- Management Reports and Communication of awards to employees. With software, employers can view data and produce aggregated reports on a variety of elements. Usually, software solutions have the ability to produce personalized compensation statements for communicating awards and sharing explanations about how salary and bonus amounts were determined. Also, these are a great way to describe the correlation between compensation and other human capital goals, such as career development and retention.
Using specialized software to plan compensation can pay great dividends for employers. Moving to specialized software can have important benefits and positive ripple effects on many parts of the company.
Knowing when it is time to use such software requires taking a hard look at your requirements and expectations.
Simply put, a cost–benefit analysis to determine if it is a sound investment decision is worth the effort.
HRsoft – The Compensation Planning Software Leader
HRsoft is a leading provider of compensation management solutions for strategic HR departments. To learn more about our compensation management software, COMPview™, click the button below!
If you enjoyed this article, here are a few more that you may enjoy!