Best Compensation Management Software - 2023

Compensation management tools are incredibly useful across the employee lifecycle. Picture the beginning of the candidate journey. What’s the market pay for the role you’re hiring? How much do you bump their salary after 2 years, assuming they perform well?

These questions and more are answered with comp management. Here are a few more use cases.

• Enhance recruitment: Comp software helps provide clarity to what the market pays for a role. It will give you and your recruiting team a range for the job. This beats the old way of asking the hiring manager or using free sources.‍
• Boost retention: You’ll be able to tell how your employees are paid relative to the market. Therefore, you can make adjustments to prevent someone from leaving because of a better-paying opportunity elsewhere. ‍
• Budget and model for future needs: Since compensation can make up 70% of the company budget, it’s essential to know how strategic decisions will impact compensation. If you are opening in a new location or will be hiring brand new roles, these tools can help you understand costs.‍
• Deliver bonuses and equity: Instead of relying on a complicated spreadsheet to calculate bonus and equity amounts, your compensation software will do this for you.‍
• Manage compensation survey data: For those already using salary survey data, the software can help manage it all in one place. Additionally, many offer tools or services to help with the tedious task of survey participation.‍
• Manage job descriptions: Job descriptions are just as impactful on compensation. A role with additional responsibilities should pay more. Descriptions should emphasize that. Some vendors have a tool, while others outsource this function to partners.‍
• Build transparency and equality: Compensation management platforms have tools that show where you can improve equality in the workplace. By recognizing gender and racial pay gaps, your company can take steps to overcome implicit biases. Many software solutions promote transparency as well. Employee dashboards break down their compensation on the individual level.

When considering compensation management software, it’s important to avoid common pitfalls that may occur. 

• Avoid shiny object syndrome: During a sales pitch, you may have seen powerful analytics tools and smooth UX that attract you to a certain vendor. But it’s essential to understand what your must-have features are, so you can separate them from the nice-to-have and extraneous features. Think about what’s essential. Otherwise, you might waste your budget on tools you’ll never touch. ‍
• Understand the professional services vendors offer: Sometimes organizations will position their solution with a “dedicated” compensation professional with “unlimited” access. These terms are often used as a selling point. Be sure you understand how the services work, how quickly you can expect replies, and the skills of the services team.‍
• Implementation takes time: Adopting a compensation management software takes time and prioritization from your team. There are no instant solutions where you just send over an HRIS, API key, or CSV and everything is up and running. Discuss timelines and expectations with vendors upfront.‍
• Be mindful of contract length: Three-year or five-year contracts with big discounts can be tempting, especially when you’re trying to be budget-conscious. However, this could leave you with software you don’t like or don’t use. Be sure you know the cancelation policy, and choose a contract length that allows you to reevaluate after a reasonable amount of time. If you do your research beforehand, this shouldn’t be an issue. But sometimes unforeseen things happen, and you don’t want to be trapped.‍
• Know the data sources: It’s critical to understand where vendors source their data from and how it is validated in your compensation software. There are many different approaches that exist. For example, a data set may be validated by compensation professionals, but be very limited in job titles. Another may be from a large data source, but weak in certain regions. Think critically about what data is important to you and choose a vendor accordingly.

It’s much easier to gain buy-in with decision makers if you have a firm grasp of ROI. Compensation management software has many benefits that will provide measurable returns for your business. Here are a few that you can bring up to your superiors:

• Save time and costly errors: Having a streamlined process for pricing a job will save you countless hours. Being able to model and use pre-built reporting provides insights you may have never discovered in Excel without the risk of errors.
• Strengthened employee loyalty: When making informed compensation decisions, employees can rest assured they are being paid competitive salaries and bonuses. As a result, they will feel valued by your company, which builds loyalty.
• Ensured compliance: Compensation compliance can be tricky, especially if you’re hiring remote workers from different geographic locations. Instead of doing all the granular research yourself, comp management software automatically assists with staying compliant
• Decrease days to fill job req and false starts: Knowing the approved salary range for the role and what the market pays will ensure you avoid the dreaded “oh I was looking for $10k more in base pay.” 
• Increased transparency: Employees who know what, how, and why they are paid are more engaged and less likely to leave. By being able to communicate a paid strategy from a high level as well as an individual will impact retention.
• Equal pay: Many comp solutions pull data from your HRIS or HCM to map salary and bonuses in accordance with gender and race. By recognizing pay gaps, you can take initiative to create an equitable workplace.‍
• Save money: In addition to saved time, comp management software saves money too. Benchmarking data shows you if you’re overpaying for a new executive. You can tweak company-wide bonus structures based on integrated performance or talent management data. These are just a couple of many examples.

Compensation management software is priced either through a subscription or a license. 

Companies such as ChartHop or Hibob, that offer comp management through their greater product suites, charge on a per user per month basis. Companies such as CURO charge for an annual license, which is based on how many employees you have. You will have to pay upfront for a license, whereas subscription you pay per month.

This will often come with implementation and service fees. If you sign a longer term contract, you may receive a discounted rate.

Don’t be afraid to negotiate a better price. For guidance, read our ebook on how to get the best pricing in HR tech.

Compensation management software is designed to streamline all of your comp operations. The features reflect that goal. 

• Salary management: Easily keep track of how much employees make and use that information to make future compensation decisions.
• Performance management: Compensation management software often has performance management tools to determine eligibility for bonuses and equity.
• Bonus and equity administration: Comp management software automatically determines who is eligible for bonuses and equity based on performance, time since hire, and other factors. Once HR managers gather this information, they can submit it to managers for approval all in the system.
• Planning, budgeting, and forecasting: Using past and current data, your company will be able to plan compensation budgets and headcount. In addition, you can use this data to forecast where your company’s needs will be in the future. Detailed dashboards make this easy to visualize.
• Market analysis and benchmarking: Many comp solutions have access to detailed salary information from across the job market. You’ll be able to tell what competitors and peers are paying their employees in similar positions. As a result, you can offer new hires competitive compensation based on market data.‍
• Integration with HR systems: Compensation management systems centralize all your people data to make informed compensation decisions.

Before you get on the call, you need to think critically about your needs. Ask about key features, implementation timelines, customer success, and all the other variables that will help you make the right decision. It’s important to not be distracted by the bells and whistles.

Here are some suggestions for questions to ask:

• How can your product help me achieve my compensation goals?
• Can you benchmark this job for me? 
• How do I build a report? How would I present this to others?
• We are opening a new office. How would I model the compensation costs with your software?
• Does this integrate with my human capital management system? If not, how much work will it take on our end to connect them?
• What features do current clients use the most?
• Are there automation features?
• Is the training required in the implementation process self-service, or hands-on with a customer success team?
• Has your product lengthened the employee lifecycle for your customers?

Implementation of compensation management software differs from company to company. Generally, you should expect to spend a few weeks to a few months on the process. 

The typical steps include set up, data integration, training, testing, going live, and post-going live review. If price is a concern, double check about implementation fees with your vendor of choice. Your first choice of vendor might have a lower annual cost, but charge big service and implementation fees that actually make it more expensive than your second choice.

What is compensation management?

Compensation management is the process of determining the wages, salary, bonuses, equity, and benefits employees and potential hires receive.

What is compensation management software?

Compensation management software are solutions designed to streamline comp processes. They achieve this by automating processes that would typically be done manually or in spreadsheets. 

What are some benefits of compensation management software?

Benefits of compensation management software include saved time and money, transparency and equal pay, ensured compliance, and heightened employee retention and satisfaction.

What are the features of compensation management software?

Compensation management software features include salary and performance management, benchmarking, reporting and analytics, planning, budgeting, and forecasting tools, and bonus and equity administration.