HR Glossary

Compensation management software

What is compensation management software?

Compensation management software enables organizations to calculate and manage every employee's compensation efficiently, including basic pay, allowances, reimbursements, perks, and benefits. By reducing manual errors and streamlining administration, employees and HR teams experience faster processing and greater accuracy in compensation management.

Why is compensation management software essential?

Compensation management software simplifies and automates complex salary administration. By using it, HR professionals can reduce manual work, and employees benefit from timely, accurate salary revisions, bonuses, and budget management. The system's transparency also empowers managers to make fair pay decisions that also help employees trust the compensation process.

What are the key features to look for in compensation management software?

If you're planning to adopt compensation management software for your organization, ensure that the system includes the following features for maximum impact:

• Flexible salary structures

Look for a system that lets you build customized salary structures with varied components based on role, location, and business units. It should also support multiple foreign currencies and align with your organization's culture and compensation policies.

• Salary revisions

The software should make it easy for managers to revise salaries with appropriate approvals and documented reasons. It should also support generating and sharing salary revision letters through ready-made templates, as well as maintain a complete history of all salary revisions and changes so that it's easy to track changes over time for audits and other references.

• Employee self-service portal

Choose a solution that empowers your employees with self-service access to view their salary structure, breakup, history, revision letters, and other compensation data at their convenience.

• Reporting and analytics

The system should come with powerful reporting and analytics features that let you track your workforce's current salaries and salary distribution, as well as the history of salaries, salary components, benefits, revisions, and other compensation trends so that you can make data-backed decisions.

>Who uses compensation management software?

Compensation management software can be useful to every employee based on their role. For instance, compensation admins can use compensation management software to manage compensation data, create salary structures, manage pay revisions, and provide inputs for payroll calculation. Managers can use the solution to access their team's salary data and work on salary revisions. Employees can track their salary structures and access and download salary revision letters.

Can compensation management software integrate with HR and payroll systems?

Yes, compensation management software can often integrate with both HR and payroll systems. It works closely with performance management solutions as part of HR systems to handle salary hike data from performance reviews. When integrated with a payroll solution, compensation management software can automatically sync key information—including approved salary changes, bonus calculations, and other payroll-related updates—to eliminate manual errors.

Can compensation management software be used for global compensation planning?

Most of the compensation management solutions in the industry have been designed to support global compensation planning. They can support multiple currencies and diverse salary components, and can even ensure compliance with region-specific compensation laws.