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Table of Contents

• What is Compensation Management Software?
• The benefits of Compensation Management Software
• Typical features of Compensation Management Software
• The cost of Compensation Management Software
• Considerations when purchasing Compensation Management Software
• Relevant Compensation Management Software trends

What is Compensation Management Software?

Compensation Management software is a cloud-based tool that manages different aspects of an employee’s compensation cycle, such as salary planning and processing, tax deduction, gratuity calculation, and bonus payouts based on rated performance metrics for individuals or business units. The software creates a centralized repository of employee compensation details—base, bonus, commission rates, and incentives to reduce manual processing.

Compensation management software is also available as a stand-alone module that can be integrated with an HR or talent management suite for overall employee management.

The benefits of Compensation Management Software

The benefits of using a compensation management solution include:

• Security and compliance: The software creates a centralized repository to maintain data related to employee compensation, which reduces the risk of misplacing important information. These tools also offer data security features such as data encryption, multiple layer password protection, and user access controls to ensure compensation data does not fall into unauthorized hands. The software allows users to be compliant with regulatory requirements while planning bonus payouts and tax deductions.
• Data accessibility and reporting: The software helps in creating transparency in the compensation process by allowing both managers and employees to view current and past payments, as well as rewards via a portal. Organized data also means reduced risk of overpayment, manual errors, and shadow accounting. In addition to streamlining the compensation planning, most solutions automatically monitor and store payout information. This data can then be used to produce built-in reports, ensuring the company stays within its budget and conforms to federal regulations.

Typical features of Compensation Management Software

• Compensation plan modeling: Calculate and analyze salary and equity distribution for employees across locations.
• Merit/bonus management: Allows you to sanction merit increases for employees based on yearly/quarterly/monthly performance rank.
• Benefits management: Keep a record of employee's benefit plans and selections throughout career progression.
• Commission management: Track employee commission potential and earnings.
• Compensation statements: Create employee benefits statements that include business perks and incentives.
• Employee database: Central repository of employee contact information and work status.
• Performance management: Organize and manage employee accomplishments and career development plans.

The cost of Compensation Management Software

Most products in the market are priced on an annual basis and can be divided into three pricing tiers based on their starting price.

Price ranges*:

• $19 - $29
• $30 - $74
• $75+

*The pricing included is for the entry-level/lowest-priced offering found on vendor websites on August 20, 2021. These ranges correspond to the 25th, 75th, and 100th percentiles of pricing information gathered from vendor websites of sample products.

The above list summarizes pricing for the base plans of most products. An enterprise or premium product that is priced higher may include additional features such as workflow automation, commission planning, salary planning, audit trail, and compensation reporting.

Considerations when purchasing Compensation Management Software

• Integration: While shortlisting compensation management software, consider your existing software infrastructure. It is important that your new application integrates well with other tools such as recruitment, onboarding, learning management, 360-degree feedback, and payroll. This will ensure a cohesive workflow and seamless collaboration between different aspects of your company’s HR management.
• Deployment models: When you are researching compensation management software, it’s wise to lean toward cloud-based deployment options. Cloud-hosted applications, in general, are more cost-effective, as they eliminate many operational and maintenance expenses that come with server installations. They are also easily accessible to users from anywhere via the internet.

Relevant Compensation Management Software trends

Artificial intelligence based compensation management: With the growing application of artificial intelligence (AI) technology in various talent management aspects, compensation management is no exception. Application of AI in compensation management automates workflow, recognizes trends, predicts employee performance, as well as optimizes compensation and incentive models. Natural language processing can help with employee sentiment detection and provides an opportunity to retain and engage employees. Also, automated compensation management communication provides compensation-related answers in real time, improving HR responsiveness and reducing support costs.