4 Risks of Using Spreadsheets for Compensation Management


Using spreadsheets for compensation management seems logical on the surface. After all, spreadsheets are for numbers and calculations. But compensation management is about much more than numbers – it’s about your employees – so it’s time to move beyond spreadsheets (if you haven’t already). Here’s why.

For decades, human resource teams have relied on spreadsheets to handle their compensation management, including merit, bonus and equity awards.

But times have changed.

Compensation is more complex than ever. Companies have to manage direct and indirect compensation while rewarding employees who perform their jobs well.

More than 4.5 million people voluntarily left their jobs in November 2021, and one of the main reasons is that they don’t feel their compensation is fair. They want to be properly compensated and rewarded for a job well done. But how can companies with thousands of employees adequately compensate their top performers when they rely on spreadsheets?

And that’s not all. Using spreadsheets exposes your company to many risks that can lead to financial losses and legal issues. Let’s look at the top four risks that can hinder your company when you rely on spreadsheets for compensation management.

Top 4 Risks of Using Spreadsheets for Compensation Management

Risk #1: Human Errors

Unfortunately, spreadsheets are prone to human error. Any time you have an employee manually enter data, there’s a chance that information could be mistyped or pasted wrong, causing costly mistakes. Financially speaking, the risk of using spreadsheets is not worth it.

Risk #2: Scalability Problems

Using spreadsheets for compensation management may seem fine when you have only a handful of employees, but what happens when your company grows? Compensation management will be harder to maintain because spreadsheets aren’t easily scalable.

When your compensation management relies on spreadsheets to gather performance data for thousands of employees, your workflow will become slow, inefficient and even more prone to human error. 

These problems compound over time. A slow, error-prone process may trickle down to unsatisfied employees who aren’t being compensated appropriately or in a timely manner  – dampening your ability to grow.

Risk #3: Security Liability

Compensation data is highly confidential. While spreadsheets may offer some security features, such as password protection and hidden formulas, for a large enterprise organization, these features are not enough. The possibility for a security breach is high – which can not only impact your reputation as an employer but also get you in trouble from compliance a standpoint. 

If your compensation data lives in spreadsheets and the Office of Federal Contract Compliance Programs (OFCCP) discovers repeated errors, you could face hefty fines.

Risk #4: Integration Issues

Finally, spreadsheets are siloed, static documents. In a compensation management process that requires collaboration between multiple departments and individuals, this is a problem – a recipe for duplicate versions of the master copy and no way to know which one is the most up-to-date version. Even cloud-based spreadsheets – like Microsoft 360 or Google Sheets – can cause similar problems. 

Compensation professionals need to input data from many sources – your payroll platforms, performance management systems, total rewards software and more – and a siloed spreadsheet makes this much more difficult. 

There’s an easier and safer way to manage compensation than using spreadsheets, and that solution is compensation management software.

The Perks of Compensation Management Software

Compensation management software does everything that spreadsheets can do and then some:

  • Manage the entire compensation cycle
  • Accurately recognize top performers
  • Establish approval hierarchies and workflows for different plans
  • Provide HR with real-time visibility into decisions being made for each employee
  • Publish and view compensation statements online

These features keep your employees invested in their employment and empower managers to make more strategic award decisions based on performance and potential.

Plus, compensation management software helps your HR team work faster and more collaboratively because they can find everything in one platform that seamlessly integrates with other HR software.


These days, spreadsheets and compensation management don’t mix. Spreadsheets pose too many risks to your company to make it worth your while. They are error-prone, difficult to scale, vulnerable and hard to integrate.

Therefore, you are better off using compensation management software that ties into your existing HR technology ecosystem. That way, you can stay ahead of the compensation cycle, better reward your employees and maintain a thriving, reputable business.

HRSoft’s compensation management software, COMPview, simplifies complex compensation plans. See how it works by requesting a demo today.