Compensation management software handles the high-level, company-wide philosophy and process of compensation and data management. Such systems are used to manage data for all salary and compensation information, as well as look at high-level compensation information and strategy for the overall company. They combine internal datasets from payroll, a human resources information system (HRIS), or performance management with external datasets that price jobs. Compensation management software is often used in tandem with other compensation platforms like compensation planning and salary benchmarking to give a comprehensive look on how pay philosophy affects employee retention, satisfaction, and productivity.
Organizations use compensation management software to view and adjust compensation policies, plan employee bonuses and structure incentives, and recommend pay adjustments. Compensation management may be used by the human resources (HR) department or executive suite to develop compensation strategies. Other users include the finance, accounting, or payroll departments to ensure equitable employee compensation and optimize salary budgets. These tools may also include or integrate with pay equity software. This allows administrators to break down information by certain demographics and protected identities to ensure fair payment across an organization and mitigate legal risk from noncompliance issues.
Compensation management software can be implemented either as a standalone solution or as part of an integrated human capital management (HCM) software. Accounting or HR departments may also use related platforms such as compensation planning software or salary benchmarking software to build out individual compensation packages and organize workers into pay bands, respectively. Compensation planning allows managers to make individual decisions for employee payment packages, while salary benchmarking specifically handles the creation and upkeep of payment bands.
Many compensation management systems integrate with performance management software to incorporate employee performance data into compensation decisions. Some compensation management products offered as part of a suite may include capabilities from sales compensation software, which specializes in building out incentive plans for salespeople.
To qualify for inclusion in the Compensation Management category, a product must:
Publish internal compensation policies and facilitate bonus structures, employee equity, and total rewards for the company
Provide market data for compensation or allow importing of external compensation data
Consolidate, analyze, and manage compensation data sets, including payroll information and third-party market pricing information
Offer scenario planning and modeling to see how merit or budget changes would impact talent attraction, retention, and risk mitigation
Handle merit and compensation cycle planning with budget allocation and approval workflows
Manage pay bands, job architecture, and pay equity, or integrate with pay equity or salary benchmarking software
