Gone are the days of flat rate employee pay raises. Nowadays, a compensation decision includes an array of attributes ranging from market rate to peer parity and performance-pay matrix. What makes the existing compensation process more complex is that all compensation-related information is spread across disparate systems.
Employees often assume that all employee-related information is accessible, visible, structured, and accurate. With HR leaders battling fragmented data and inconsistent information to get a complete picture of components that contribute to compensation-related decisions, the compensation management process drags on for what feels like forever.
Improved employee data management and technology adoption can do wonders to your compensation management process by improving employee engagement and reducing turnover. To stay ahead of the curve, organizations need to streamline the end-to-end compensation management process.
Here’s a breakdown of the positive impact technology can have on your compensation management lifecycle across a range of functionalities.
Six Stages of Compensation Management
The compensation management lifecycle starts when an employee decides to join the organization and goes on until the employee exits the organization. It is the common thread that leverages employee performance data as the foundation and glue to build a win-win employee-employer relationship.
Ideally, compensation management consists of six stages that are listed below:
- Setting an overarching organizational strategy
Though it is not really a starting point for compensation management, determining which route your organization will take ensures that your compensation decisions align with your business goals.
- Crafting a standard compensation policy
Having a clear-cut compensation policy will eliminate any ambiguity in compensation decisions and simplify the calculation of base pay, benefits and other important components while extending an offer to a promising candidate .
- Performing analysis of available job roles
The research done during this stage comes in handy while HR managers draft job descriptions for an open position. The process will help determine the relative worth of a job and the compensation package aligned to it.
- Evaluating contingent factors like cost of living
Ideally, a compensation plan must be formulated only after taking contingent factors both internal and external into consideration. While internal factors can be something akin to seniority, external factors can include anything ranging from labor laws to economic downturn and market value.
- Designing and implementing a compensation plan
Once the steps listed above are completed, you will have enough information to craft a compensation plan that aligns with your business goals and employee expectations.
- Evaluating and reviewing the existing process
Your compensation plan can never stay rigid as it is affected by an array of dynamic aspects like economic condition, cost of living, and more. So, rather than taking an once-and-done approach, businesses need to check whether or not their existing compensation practices leave a positive impact on end variables like employee productivity.
The Role of Technology at Every Stage Of Compensation Management
Ever-evolving employee expectations and economic conditions demand a complete revamp of traditional compensation management processes to avoid disengagement and turnover. A recent compensation Deloitte survey shows that most organizations are reinventing their compensation practices and making them more human-focused in nature.
An automated compensation management tool will not only standardize the compensation process but will also cater to the unique compensation needs of an organization like taking a more human-centric approach without exposing itself to the risk of human errors and biases. A compensation management system will help businesses to:
- Inject pay transparency into their compensation lifecycle
- Enhance employee experience and trust
- Add credibility to the performance evaluation process
- Shorten the compensation management cycle
- Eliminate inherent compensation-related biases
- Improve stakeholder engagement and collaboration
- Enforce regulations and policies as and when required
The Only Way to Move Forward
Today, technology is an integral part of all HR practices including compensation management. HR leaders and functional management can gain the ability to do more with less by embracing compensation automation.
Automated compensation management process is more seamless and efficient. It improves employee relationships by enhancing engagement and transparency while lowering the chance for biases. With organizations across the world automating their compensation management process at a rapid pace, it is time to act or risk being left behind.