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The Business Case for Automating Compensation

As companies go through their annual “comp rounds” this month, many employees, managers, and compensation administrators may be wishing there was a better way to review last year’s performance and roll out pay plans for this year.

If you’re wishing that too, you’re probably still using a spreadsheet-based method, a homegrown (and outgrown) system, or a compensation module in a software suite that is too limiting. Perhaps you have sworn that this year will be the last time you slog through the process this way.

If you’re looking to make a business case for digitizing your compensation processes, here’s a quick look at the very real benefits that companies report after moving to a dedicated compensation platform.

What does it mean to automate compensation management?

First, what exactly do we mean when we talk about digitizing and automating compensation? To automate compensation management means to establish a digital platform for:

  • Development and review of compensation plans
  • “Comp round” processes for salary reviews, bonuses, etc.
  • Calculations used to determine compensation
  • Generation of statements and reports

Why not use your HR software suite?

It’s true that many Human Resource (HR) software suites or Human Capital Management (HCM) systems have a compensation module. However, these are often not adequate for companies who want to use compensation strategically, who have complexity, or who seek flexibility. Large and/or global companies will seldom be able to do everything they need or want to do within the confines of their HR software. 

For this reason, many large or sophisticated enterprises have adopted a best-in-class approach to compensation management and moved to a dedicated compensation solution that exists symbiotically with their core HR platform. If you weren’t a biology major, symbiosis is a relationship of mutual benefit or dependence.

The benefits of automation

Automating your compensation processes will undoubtedly make your comp rounds, performance reviews, and other rewards practices easier, but there are other benefits that will be felt around your organization as a result. When making a business case for compensation automation, it’s important to explore how different departments and levels of senior management will benefit from the investment. Primarily, there are 5 types of improvements in which organizations can look forward to:

  1. Operational benefits. This refers to the processes that are really at the heart of your organization. By leveraging automation, data management becomes significantly more efficient because you no longer have to rely on spreadsheets and manual calculations (which are also at risk of being incorrect). In turn, this can improve your employee experience, make reporting to stakeholders easier, and strengthen the visibility and control of your data by your management team.
  2. Financial benefits. Greater efficiency and accuracy result in time and cost savings and fewer pay disputes, not to mention increasing employee trust in the system. In addition, a centralized system makes it easier to analyze compensation effectiveness and optimize plans to save costs. A cloud-based solution also can mean reduced infrastructure and operating costs. 
  3. Strategic benefits. By removing system limitations, you can implement exactly the rewards strategies you need to align rewards with business goals and achieve the desired results. Having a centralized source of real-time compensation and performance information enables employees to be clear on their goals and see the link between performance and reward, and enables management to make better decisions.
  4. Risk and compliance benefits. A centralized compensation system provides the controls and transparency needed to support regulatory compliance and audits, by granting full visibility and accountability for plans, calculations, processes, and approvals. Reporting capabilities facilitate audits and minimize their time and cost. And, legal and reputational risk can be minimized when you are able to identify pay gaps and take corrective action, both to avoid lawsuits and establish a reputation for fair pay.
  5. Recruiting and retention benefits. The ability to align your pay scales with benchmarks in each of your labor markets lets you attract talent globally. With the right analytic tools you also can measure compensation across attributes like gender, age, race, job grade, etc., enabling you to find, fix, and prevent pay gap issues. Fair and competitive compensation, along with timely and well-communicated pay, will boost your employer brand internally and externally.

Solve your compensation challenges

Need more reasons to automate your compensation? Bring your business challenges to a beqom compensation expert to see how digital compensation management can transform your business.

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