Spreadsheets have long been a trusty tool for HR and compensation pros when it comes to the annual salary review. But in 2024, we’d argue that this clunky, outdated software is no longer up to the job.
Read on for seven reasons why Excel* isn’t the best tool for managing your compensation reviews — and what to use instead.
*Other spreadsheet software is available!
The pros of using Excel for compensation reviews
Before we start hating on spreadsheets, let’s talk a bit about some of the advantages of using this software for your compensation reviews. After all, Excel has been the go-to tool for compensation leaders for long enough… that can’t be for nothing.
Here are three of the main reasons compensation leaders choose to use Excel for their reviews:
- It’s cheap: Most spreadsheet software is either free or included in a package of work tools you already use. This makes it a cost-effective option for managing your compensation reviews. Or does it? The reality is, this is a bit of a false economy. Using Excel for compensation reviews can result in so much lost time due to tail-chasing and inefficiency that any cost advantage is basically negated.
- It’s (kind of) simple: One of the biggest advantages of using Excel for your comp reviews is that your employees probably already know how to use it. But here’s the thing: compensation reviews can get pretty complicated. Even if employees have seen a few spreadsheets in their time, that doesn’t mean dealing with the complexities of the compensation review process will come easily to them.
- It’s built for numbers: Excel is built for numbers, and numbers are what your compensation review is all about, right? Wrong. It’s actually about so much more than that: pay equity, market trends, your compensation philosophy… and most importantly, your employees. A tool like Excel lacks the functionality to properly manage such a complex (and important) process.
7 cons of using spreadsheets for compensation reviews
So, what are the problems with using Excel for compensation reviews? Let’s get into it.
1. High potential for human error
First of all, let’s talk about one of the most obvious drawbacks of using spreadsheets for something as sensitive as your annual compensation review: there’s a big potential for human error.
Think about it: one typo, formula mistake or accidental deletion could easily end up transposed into numerous other linked sheets — with disastrous consequences.
Plus, the compensation review process involves a lot of different stakeholders, who may all have to edit the spreadsheet at one time or another. That means that the possibility of these mistakes arising is multiplied.
The fact is, the internet abounds with horror stories about spreadsheet mistakes with catastrophic results. Do you really want to take that risk when it comes to your employees’ compensation?
2. Not collaboration-friendly
As we’ve mentioned, the compensation review process involves a lot of different parties. And most spreadsheet software is simply not set up for that level of collaboration.
Just to gather pay recommendations from various managers, whoever is leading the review typically has to spend time splitting the spreadsheet into multiple versions — and then make sure they send the right one to each person. This ensures that each manager only sees pay data for their own team, but it can be a lot of work.
Then, once you’ve gathered all of your managers’ responses, you’ll need to merge them back together for calibration. And you better hope no one has added an extra column, or you’ll be facing a real headache.
The point is, this sending back and forth of static documents isn’t just a lot of work. It’s also just not a good way to manage a process as sensitive as your compensation review.
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3. Lack of control
When multiple people have access to the same document, there’s nothing to stop them from making changes. And, even with features like edit history, this can sometimes go undetected. When you use spreadsheets for compensation reviews, you don’t have a lot of control over the process — which can lead to errors.
There’s also an inherent security risk in having your sensitive compensation data floating around in people’s inboxes, mobile phones and personal computers on a spreadsheet. The possibility of a security breach (accidental or otherwise) is high. This could get your company into trouble from a compliance standpoint and seriously damage your reputation.
4. Inefficient workflows and long approval cycles
As we’ve mentioned, an Excel-powered compensation review involves creating multiple versions of the same spreadsheet to send to various managers. And these often sit in ‘inbox purgatory’ for a long time as managers prioritise the other tasks on their lists. HR then have to waste more time chasing up each manager for their pay recommendations.
When you multiply this by the number of different people each pay decision might need to go through before it’s approved, you’re looking at a very long and inefficient process.
Also, spreadsheets may not easily integrate with the other tools you use for HR and compensation (like your HRIS, performance management software or benefits platform, for example). That means HR teams end up manually transferring information from one piece of software to another — wasting even more time and creating more opportunities for error.
5. Confusing for managers
While seasoned HR and compensation pros might have no problem navigating your complex compensation review spreadsheet, it’s a different story for managers.
That means that, if you want their input or approval, you’ll have to spend time explaining how the spreadsheet works, which parts they should be editing and which parts they should leave alone. This can create a lot of unnecessary back and forth, as multiple managers will inevitably have the same questions.
As well as wasting your HR team’s time, this is also not a very pleasant process for managers — who after all have other things to be getting on with.
6. Not flexible or scalable
Small companies with just a handful of employees might be able to handle their compensation reviews on a spreadsheet. But this can quickly get out of hand as your compensation structure becomes more complex.
Because spreadsheets aren’t easily scalable, growing companies will likely see their processes become even more slow and inefficient as their headcount increases.
Plus, spreadsheets are inherently quite rigid. That means that, if you make a change to your compensation strategy (for example, giving a higher weighting to performance increases vs. general increases), you might have to spend a long time adjusting your spreadsheet to reflect this — and then making sure everyone is working from the right version.
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7. Lack of visibility and transparency
HR teams and company leaders need a bird’s eye view of every aspect of their compensation structure. And there’s just no way a simple spreadsheet can provide this.
For example, spreadsheets can’t provide context into historical employee compensation. And they don’t give you enough information to properly compare different compensation metrics and analyse whether you’re paying your employees fairly.
There’s also no getting away from the hottest topic in compensation circles right now: pay transparency. In the coming years, companies across Europe will have to get much more transparent about how and why they make decisions about pay.
To prepare, companies need to set up a comprehensive transparency strategy including things like pay equity analysis, compensation planning, job level management and more. Unfortunately, the humble spreadsheet is simply not set up for that level of detail.
So, what should you use instead?
Look, we’re not saying it’s impossible to run a compensation review using Excel. We’ve done it ourselves, after all. And we’ve got no personal beef with Microsoft Excel, Google Sheets or any other spreadsheet software.
What we are saying is that there are a lot of (big) problems with this approach. And saying au revoir to spreadsheets could save you a lot of headaches in 2025 and beyond.
So, what should you be using to manage your compensation review, if Excel doesn’t cut it?
We’re glad you asked.
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Introducing Figures Compensation Reviews
Figures Compensation Reviews is the new addition to our suite of compensation management tools. It’s designed to help you run smooth, seamless and compliant compensation reviews — without keeping track of multiple spreadsheets or chasing up managers for answers.
Here’s how it works:
- Create your campaign: Start by tailoring your to your organisational strategy, structure and budget.
- Stay informed throughout the process: Managers will be automatically prompted to complete their reviews, and HR can keep a close eye on the validation process from a convenient dashboard.
- Make strategic, data-driven decisions: With in-built analytics and budget tracking, backed up by our extensive database of European salary data, you can be sure you’re making fair, equitable decisions about pay.
Unlike Excel, our compensation review module is set up for smooth and secure collaboration. Admins can add people to the platform, granting custom access so they only see what they need to. And reviewers can see all of their pending reviews in one central dashboard — and provide their input right within Figures.
Figures gathers all the information you need for your compensation reviews in one place, and records every action as it happens. That means you’ll have a detailed history of each suggestion, validation and request for every employee — giving you the context you need to make fair salary decisions.
Plus, our platform comes with in-built visuals, analytics and salary suggestions based on internal and external data. This builds fairness and accountability into your compensation review process — helping you to prepare for upcoming pay transparency legislation.
Lastly, we built the compensation review module with flexibility and deep customisation in mind. That means you can tailor your reviews to your needs — and continue to adjust your process as your needs change.
In short, our compensation review module is the tool you need for efficient, seamless compensation reviews that don’t give you a headache.
Want to find out more about Figures? Sign up for a free demo to get started.
