Organizations face a crisis once they reach a substantial number of employees. The number depends on the complexity of the job roles, but the issue remains the same. Compensation management.
Compensation management in an organization with hundreds of employees having different job roles and different salary structures isn’t practical through maintaining spreadsheets. The constant hiring process with different experience levels demands a systematic approach that doesn’t make anyone feel left out or underpaid, and in turn, leaves for other better opportunities.
What Are Compensation Management Software
Compensation management software is an automated solution for employee compensation, performance, and retention issues that an HR professional may face during the hiring and rewarding of talents.
As the compensation plans get more complex with the inclusion of several non-monetary benefits and rewards, most compensation management solutions revolve around a configurable, intuitive, and streamlined approach.
However, every compensation management software isn’t the same. While most of them overlap between the attributes mentioned below, you must choose the product that caters to your needs. Trying to make a solution to a different problem isn’t worth the time and effort.
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Here are 5 types of compensation management software you should check out.
- Hourly Compensation Management Software
Neither a fixed salary nor an incentive-based compensation, hourly compensation is based on the number of hours an employee or contract worker has put into the project for you. They may or may not have flexible schedules. In most countries, hourly compensated employees are non-exempt. This means that they are entitled to enjoy overtime at a 1.5X rate over their weekly limit.
When you put these equations into play and add sprinkles of incentive and reward compensation over hourly wages, the packages are bound to become challenging to manage. Plus, if you have different employees enjoying different wages, especially depending on their performance, it becomes virtually impossible.
Hourly compensation management software helps HR professionals know what the standard wage for the job role is, and the company budget. Depending on these attributes and others, the software recommends an hourly wage that is suitable for both employee and employer. In various cases, the hourly compensation management software also generates work context and minimum wage data for the convenience of HR professionals.
- Salary Compensation Management Software
Salaries differ significantly among employees of the same organization. Depending on their experience and performance, the performance and reward system may also vary. In many organizations, this issue is mitigated through either overcompensation or under-compensation. That further complicates the issue and plummets overall performance.
When you have employees on your payroll, their packages consist of base pay, variable pay, insurance, retirement funds, health benefits, and many other factors. It’s only reasonable to admit that each one of them won’t be drawing the same package or the same salary breakup. The variations in the salary structure make it essential for companies to use salary compensation management software.
Salary compensation management software is responsible for informing HR professionals about the current salary trends and breakups. Overseeing the entire compensation cycle also falls upon the compensation management tools. You, as an HR, can review the award recommendations and supervise employees with real-time visibility of their performance.
- Incentive Compensation Management Software
In general, incentive compensation management revolves around the variable compensations that a salesperson receives upon completion of deals or projects. An incentive compensation may be awarded on top of salary or imposed directly on the sales. Whatever it may be, the complex structure of incentives makes it challenging for organizations to keep track.
Suppose a business has 3 products and 10 sales persons. Each salesperson is responsible for selling all 3 products. The incentive is awarded on the price of the products.
Even if we consider the incentive percentage being the same for all of them, they won’t be generating the same sales individually or throughout the year.
A more complex calculation is required if the incentive is different among employees and if the products have different incentive ranges.
Incentive compensation management solutions keep separate accounts for each employee and their incentive ranges. The tools can be customized to fit the needs of companies. As every salesperson gets their own account, managing their incentive in the light of their sales figures gets easier than manual approaches.
- Reward Compensation Management Software
Rewards are fundamentally different from incentives. While incentive compensations follow a set of rules and wage policies, rewards are given out to employees who have performed exceptionally throughout a predefined time frame like a month or a year. Reward compensations encourage employees to perform more enthusiastically.
Reward compensations are generally awarded for the significant contribution of an employee to the organization. However, in this dynamic market, every employee tries to maximize their input towards the organization, so, a competition-based reward system is lagging and counterproductive. Thus, consistent policies are developed to constantly monitor employee performances and reward them fairly.
This employee-based reward compensation is managed by reward compensation management software. The tool ensures that an HR policy is developed to measure the performance of the employees that don’t compare apples to oranges. Through the reward compensation management solutions, the HR professionals can visualize the contribution of each employee and even the recommended reward amount based on the company budget and circumstances.
- Benefits Compensation Management Software
Employees enjoy a wide range of benefits from organizations including:
- Health benefits
- Paid leave
- Remote work options
- Life insurance
- Retirement benefits
- Financial planning
And much more. These benefits aren’t constant throughout the job roles and individuals in an organization. The benefits that an employee may enjoy are dependent on the job role, package, and experience they have. It may also depend on the type of employment. A gig worker may not get the same benefits from the organization that a full-time worker may get.
Benefit compensation management software helps HR professionals of an organization to determine the benefits that an employee may get at the time of hiring. Plus, if a promotion is awarded to the employees, the necessary revisions are also recommended through the software.
The Bottom Line
Compensation management software helps organizations keep up with the ridiculous amount of work that goes behind compensating employees with a fair package. There are different ways how an organization can compensate their employees such as salary compensation management software and incentives, to name a few.
Whichever compensation method an organization opts for, it is essential to pick the one that would fit their workflow the most.
