Decoding Compensation Management Software: A Comprehensive Guide to Features and Benefits

February 16, 2024
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Decoding Compensation Management Software: A Comprehensive Guide to Features and Benefits

While employees want to feel a sense of purpose at work — they also want to know they’re being paid fairly. And if they don’t, there’s a high chance they’ll leave your company for somewhere else. That’s why getting compensation decisions right is one of HR's most crucial roles. 

Relying on outdated and ineffective compensation management practices means you might not be making the best decisions. And this often leads to negative outcomes, from disengaged and underperforming employees to inequitable pay practices that create resentment. 

That’s why many companies are now choosing to use compensation management software. Discover more about compensation software — from the key features to look for to the benefits it can bring to your company, and how to choose the platform that’s right for your company’s needs. 

What is Compensation Management Software?

Compensation management software offers a centralised platform that gives an overview of all employees’ compensation data.

In addition to monetary compensation, most platforms include details about non-monetary benefits, so it’s easy to see each employee’s total compensation package at a glance. 

Over the past few years, compensation management software has evolved in response to the changing needs of HR. Modern software is designed to help companies create equitable compensation strategies backed by objective data, not subjective decisions. 

Key Features of Compensation Software

When it comes to choosing the best compensation management software for your company’s needs — HR leaders are spoiled for choice. The key is choosing software with the features that you need to make a difference. 

Here’s the top five features to bear in mind. 

1. Integration with existing software 

Relying on separate spreadsheets for tracking monetary compensation, non-monetary compensation, pay increases, bonuses, and anything else you need to track is labour-intensive and can create errors.

Instead, using a compensation management system that can integrate with your current HRIS software is a far more efficient choice. 

Connecting your software in this way offers plenty of advantages, from enhanced security to data accuracy and ease of use. 

Once connected to your HRIS software, Figures also offers customised notifications tailored to your compensation strategy, allowing you to make the adjustments needed to stay as competitive as possible within your market.    

2. Customisable 

Not all companies need the same features at the same time. Choosing software with plenty of options for customisation means HR can make informed decisions based on their unique needs. 

This feature also allows HR leaders to adjust compensation plans based on specific factors like market position, location, and more.

3. Salary benchmarking 

This feature allows companies access to salary benchmarking data that compares your company’s salaries with those of your competitors. 

Software that uses real-time data collected from a large number of competitors makes it easier to create compensation plans that attract top talent while maximising your budget. 

4. Performance-based compensation 

Integrating performance management data into your compensation management software makes it easier for HR and managers to make decisions around performance-based compensation. 

Within Figures Compensation Review, it’s easy to calculate consistent salary increases based on performance review discussions. By inputting your budget for increases, Figures helps you distribute this fairly based on both performance and market positioning. This feature makes it easier to identify employees who are meeting their targets and reward them based on their performance. Combining this with incentive compensation management strategies helps create total compensation packages that attract and retain talent. 

5. Market analysis 

The most effective compensation decisions take into account industry trends, but this is only possible with extensive market analysis and real-time data. Collecting this manually takes a significant amount of time, and isn’t always that accurate. 

Instead, using a compensation management platform, like Figures, that includes market analysis makes it easier to quickly compare your compensation packages to those of your competitors.

Filter by market positioning, industry, funding and more, to uncover whether your employees’ salaries are competitive. Then view each employee’s data to see if their salary is on target or not.  

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Benefits of Implementing Compensation Software

From boosting employee engagement to driving pay equity, compensation management platforms bring a wide range of benefits. We’ve outlined the main ones below:

Helps plan compensation packages 

Using compensation management software helps companies create compensation packages for new and existing employees based on their budget, market rates, and performance. 

Helps meet compliance requirements 

Companies have to abide by a wide range of laws, including those covering equal pay and anti-discrimination. Using compensation management software can help meet these regulations by ensuring that not only your data is up-to-date, but any pay gaps have been proactively highlighted and resolved.

For example, the EU Pay Transparency Directive requires that any company with over 250 employees must publish details about its employee salaries. If pay gaps of 5% or more are identified and can’t be justified, companies may face sanctions and fines. 

Improves accuracy and impartiality

Traditionally, pay decisions have been made based on subjective criteria, for example, an employee’s past salary, or the opinion of managers. Using data like salary bands and employee performance, companies can show that pay decisions are based on objective criteria, which makes this process fairer for everyone. 

Effectively manage budgets 

Employee compensation tends to be one of the major outgoings for any company. Compensation management software can help you forecast the impact of any compensation reviews, making it easier to effectively manage your budget. 

Ensures equitable pay 

As the EU Pay Transparency Directive comes into force, companies need to make sure their pay practices are equitable. Using compensation management software helps highlight and solve any discrepancies. 

Boosts employee engagement, satisfaction, and retention 

Employees who know they’re being paid fairly are more likely to stay engaged. Engaged employees tend to perform better, and remain at their roles for longer. Replacing employees takes a significant amount of time and money, not to mention the specialist knowledge that’s lost when an employee leaves their role. 

Efficient management of bonuses and incentives 

Using compensation management software to plan bonuses and incentives can help maximise your budget while also making sure that every employee receives a total compensation package that meets their needs. 

Saves time

HR teams spend a significant amount of time on manual, administrative tasks. Automating certain aspects of your HR processes helps save time, allowing your team to dedicate their focus to strategic initiatives like engagement and retention. 

Improves transparency 

Employees want to know they’re being paid fairly — and the right compensation management software can help offer the transparency they’re looking for. Showing employees that their pay decisions are backed by objective, data-driven results can help reduce the chance of any disputes. 

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Considerations for Choosing the Right Software

There’s a huge number of compensation management software options on the market — so how do you choose the right one for your company's specific needs? 

What’s important here is aligning software features with your organisational needs. Here’s what to bear in mind: 

  • Scalability: Whether you’re a startup anticipating a period of hypergrowth or an established leader in your space, any software should be scalable enough to grow with your company’s evolving needs. Confirm how many users the platform can support, and whether different pricing structures are applicable, depending on your company size. 
  • Integration capabilities: Any compensation software should be able to integrate with your existing HR systems like benefits, payroll, and performance management. Using an integrated system saves time and reduces the chance of errors. 
  • User-friendliness: The best software systems are intuitive to use and easy to navigate. Ask any vendors if it’s possible to demo their software so you can get an idea if it’s going to fit your needs. 
  • Vendor support: Getting used to a new platform takes time, but good vendor support makes this process much easier. Look for vendors that offer a dedicated account manager, plus comprehensive support and ongoing training. 
  • Reviews and recommendations: It’s always a good idea to check out the reviews left by existing users. These may highlight issues that you might want to discuss with the vendor before committing to their product. 

Integration with HR Systems

The right compensation software helps HR teams move away from siloed data and towards an integrated, easy-to-access system. 

But it’s important to make sure that any software can also integrate with your other HR systems like performance management and payroll. 

HR specialists spend around 40% of their time on manual, administrative tasks, but switching to integrated HR systems can help boost efficiency and save time. Before signing up for a specific platform, check that it can integrate with your existing software. 

Security and Compliance

Handing over sensitive employee information to a third party shouldn’t be done lightly. Before signing up for any compensation software, it’s important to confirm that the company complies with data security best practices. 

Ask for information about the security measures used to protect your data, including data encryption and access controls.

Look for companies that follow the General Data Protection Regulation (GDPR) and comply with System and Organisation Controls (SOC) 2 covering how the security of their systems and processes helps safeguard your employees’ data. 

In addition to complying with GDPR and SOC 2 regulations, Figures is the first European compensation management solution to be ISO 27001 compliant. This is recognised as one of the world’s highest standards for security management — and means your data is in safe hands. 

How Klarx transformed its compensation processes, with Figures

When construction machinery rental company Klarx needed to overhaul their compensation processes — they looked to Figures. Previously, the HR department relied on Glassdoor to collect benchmarking data, and spreadsheets for storing everything they needed. 

Switching to Figures compensation management software allowed Senior People Experience Manager Filippo Laita to transform their compensation reviews. Now, up-to-date benchmarking data helps them set salaries that attract — and retain — top talent. 

Figures data also helps the HR team more accurately forecast how much budget will be taken up by pay increases, making it easier to plan for the future. 

Compensation, done right 

Compensation management software has the power to transform your company’s compensation practices. From driving equitable pay to saving time and increasing the transparency of pay decisions, there’s a huge number of benefits ready to be unlocked. 

But choosing the right software to suit your company’s needs is also crucial. By exploring a range of different options, you’ll be ready to create an advanced compensation solution, that’s perfectly tailored to your organisational needs. 

Step one: sign up for a free demo of Figures, and see what’s possible. 

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