How HR Software Can Help with Compensation Management

Compensation is a core human resource (HR) concept whose efficiency depends in large part upon the approach chosen by those implementing it.

Compensation as Financial Transaction

Traditionally, organizations have seen employees as a resource that has a cost attached to it (like any other capital), may require some investment for maintenance (e.g., training), and needs to be replaced when it becomes obsolete (retirement), or removed when not needed (layoffs). Compensation was little more than a financial transaction.

In this scenario, the employee ends up exchanging her time and skills against the salary and possible benefits offered by employers. And the role of the HR professional is not much different from that of a warehouse or procurement manager. They both share the common goal of finding good resources at low costs and keeping maintenance costs down. So, compensation was relatively easy.

A Current Approach to Compensation

Today, organizations tend to view employees as more than just another resource. Compensation has become blended within an overall talent management approach where compensation programs include all employees and not only the “rock stars” of the organization. There may be variations depending on the type and level of contribution of each employee, but generally speaking, compensation aims to be consistent and to motivate all employees.

With this modern approach, the basic needs of all employees are covered. Employees can now seek pleasure and satisfaction in what they do, rather than continuously struggle to assert their value within a company or fight for their rights.

Software Can Help Ensure Fair Compensation

Although HR software will not perform miracles, nor will it convert reactive and rigid HR professionals or managers into proactive leaders, here are a few things it can do to help:
  • Software allows decision makers to manage and visualize compensation within an overall talent management picture; as a result, managers may be able to match what people want (i.e. salary or career expectations) with what the company has to offer.
  • Analytics indicates trends in employee behavior, which can lead to the ongoing adjustment of the overall compensation planning. But, this is possible only if a company gathers and maps employee satisfaction data (exit interviews, annual reviews, etc.).
  • Technology has the ability to create a space where employees are able to share unstructured feedback (e.g., freeform comments as opposed to pre-defined surveys). Unstructured data is a valuable source of insight for HR managers, as it allows them to trace employees’ dissatisfaction with compensation, in real time. Based on individual comments, HR managers can tailor personalized compensation packages. This, however, can function only within a context where employees are encouraged to speak and where their opinions are taken into account.
  • As flexibility is becoming an important part of compensation packages, software can help track flexible work conditions, thus eliminating timesheets or the need to punch in and out.
  • Learning management technology allows for the easy delivery of enterprise learning programs. Learning contributes to employee development and can be an appealing part of compensation packages since the cost of ongoing education is often prohibitive.
Today, it seems that the way in which technology can assist with designing fair compensation plans depends entirely on the company culture and on the ability (or willingness) of its decision makers to adapt to employees’ demands.

One has to understand that compensation has many components and money is but one of them. While employees treasure respect they cannot live on respect alone. Research suggests that “pay is much more important in people's actual choices and behaviors than it is in their self-reports about what motivates them.”

With the millennial generation coming into the workforce, employers will most likely negotiate and model their approach to compensation to reflect a new vision of a new generation, who believes that employers can do more for society than making money.
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