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7 Major Risks of Using Spreadsheets for Compensation Management

Your classic spreadsheet-based compensation management is a ticking time bomb waiting to explode. One wrong spreadsheet entry can cause payroll errors, employee dissatisfaction, and blow your payroll process right up your face. What SMBs don’t realize is that while spreadsheets are useful in their own way, they are useful only to a certain extent. 

Adapting an “It ain’t broke, don’t fix it” will only make existing risks spiral out of control and leave a hefty financial impact on your organization’s bottom line. While band-aid solutions like adding more staff members or creating an exhaustive compensation strategy checklist may help a bit, these instant fixtures will make little to no difference in the long run.

Before you get all geared up to fix the mess left behind by your manual compensation management process, you need to have a clear understanding of the worst parts of the spreadsheet-centric compensation management process. While there are an array of challenges involved, listed below are seven major risks of using spreadsheets for compensation management.

1. Spreadsheets are cost-intensive and not collaboration-friendly 

Compensation management is a crucial process that has multiple stakeholders and a slew of compliance restrictions that need to be met. When data is spread across a series of spreadsheets, stakeholders are forced to sift through overflowing spreadsheets and long email threads to track an employee’s compensation.

When the only way to exchange information is cumbersome and time-intensive, its time-intensive nature impacts the productivity and efficiency of stakeholders ranging from employees to functional managers and HR leaders, making it injurious to your organization’s growth by increasing operational costs and shrinking profit margins. 

2. Spreadsheets are prone to manual errors and inaccuracies

Despite being vitally important to the operation of a company, the compensation spreadsheet is not as rigorously tested as it needs to be. Even when it is subjected to critical reviews, there are chances of people involved to misinterpret the data and overlook incorrect formulas paving the way to create yet another spreadsheet blunder like an hefty $11 million severance error.

3. Spreadsheets are obstructive to compliance

The biggest roadblock for enforcing leave policies is the most trusted spreadsheet. Inherent lack of controls in spreadsheets make it easy for people to edit or update data without being detected. Often, edit history isn’t just enough to keep security risks at bay. 

When there aren’t proper measures in place to prevent people from viewing or editing their compensation details, it can open an extremely potent can of compliance worms that range from time theft to outright money laundering.

4. Spreadsheets lack transparency and visibility

When there is no visibility into historical employee compensation details, organizations will not have enough data to compare compensation metrics and analyze whether their employees are being paid in a fair way. 

Both functional and HR managers need a bird’s eye view of every little detail that matters from pay policy to payment cycle and miscellaneous employee benefits. Trying to extract this information from emails and excel sheets is futile. Drawing up a conclusion from inaccurate data, or banking on your intuition, is a huge gamble that can affect the brand’s reputation.  

5. Spreadsheets cause confusion and chaos

When compensation is completely managed using spreadsheets, there’s a high chance for older versions of these documents being circulated and used by both functional managers and employees. Such instances of data mismatch can cause endless disputes, employee dissatisfaction, and more.

6. Spreadsheets lead to long and windy approval cycles

When all confidential compensation data is saved on online forms and spreadsheets, getting things done at the right time is impossible and leads to a long and complex cycle. In such instances, HR managers are forced to create endless copies of compensation-related documents and distribute it manually to the team. 

7. Spreadsheets cannot establish accountability

While old-school compensation management excel templates can help organizations save a few bucks in investment, it’s siloed interface that doesn’t communicate with other payroll administrative apps. As a result, HR managers end up spending too many hours tying up loose ends on spreadsheets and chasing after stakeholders to get necessary input or approval.  

Switch to sophisticated compensation management

Manual compensation management processes impede day-to-day HR operations, and also cost a lot more than you may realize. Your compensation management practices are unique and so is the way you use spreadsheets to manage employee remuneration. 

For you to get a clear idea of whether a spreadsheet is sufficient for your compensation management practices or if you can benefit from a cloud-based compensation management software like Compport, it’s best to see for yourself how each tool works with your employee compensation information, carrying out the operational tasks that you normally require. 

Get a free demo today and see the magic it can bring to your business.