Not to be confused with payroll, compensation management refers to the process of managing people’s salaries and benefits as part of a company’s wider remuneration budget and strategy. Companies use such tools to set base salaries and salary bands, plot out their bonus structure, standardise stock options and more.
Until recently, this was all managed manually. And if that’s still true for your company then it’s time to wake up: you could be losing talented staff to more tech-aware rivals. You’re also missing an opportunity to increase transparency and make pay fairer.
How do you modernise? By taking advantage of the numerous new services that make these processes more efficient and more dynamic. In one stroke, you should increase employee satisfaction and engagement. Longer term, you can expect more diverse and inclusive workforces, plus fewer cases of financial stress.
Here, we round up some of the best compensation management solutions and tools to help you and your business take advantage of this shift. We divide them into dedicated compensation management services and compensation management tools offered as part of wider HR and people software packages.
- Dedicated compensation management solutions
- Best HR packages with compensation management tools
Dedicated compensation management solutions
PayScale was an early pioneer of compensation management tools and now has the largest bank of salary data worldwide. It collects data on salaries, benefits and compensation packages to create real-time compensation data sets.
Companies use these data sets to benchmark themselves against their competition and see how their strategy fits into wider job market trends. HR teams can then create salary reports and comparisons – with help from PayScale’s AI-powered recommendations – for when they’re planning budgets or during salary negotiations.
In short, they can see what needs to be done to create more competitive packages, achieve pay equity and thus attract and retain staff.
Ravio is a compensation management platform like PayScale that uses real-time data to create market benchmarks. It helps HR teams analyse how their salaries compare to those offered by like-for-like companies with like-for-like roles across Europe.
HR teams can filter by sector, country, headcount and funding stage. This analysis also shows how they’re performing in terms of pay equity and diversity and inclusion. The software also highlights any areas where firms risk losing staff due to poor compensation practices.
From here, HR teams use Ravio’s benchmarking, analysis and live market data to make more informed decisions when it comes to annual pay reviews, promotion and pay rise discussions. And what to offer new hires. The fact this data is live and dynamic also means HR teams can stay ahead of trends and react accordingly.
Built “by HR, for HR”, Figures’ compensation management solution offers two key features: a Compensation Benchmark and a Salary Bands tool. Both use real-time market data to help companies check how their compensation structure compares to rival firms.
The benchmark is similar to that offered by PayScale and Ravio. It highlights where the company is falling short in terms of gender equality, and which roles or “role families” are over- or underperforming in terms of salary. It then allows HR teams to adjust pay parameters to see how different strategies could impact their bottom line, or how they align with the company’s budgets and growth plans.
More recently, the firm launched its Salary Bands tool, said to be the first of its kind in Europe. Companies use it to define salary ranges across every level of their organisation, including how much a company is willing to pay for each job at a given level, at different locations.
The bands themselves are determined by the firm’s compensation strategy, how it compares to others in the market (taken from Figures’ benchmarking tool), as well as budgets. Employers can set up salary bands for each role, and adjust them based on experience, location and other factors. Employees can then use this information to negotiate with more confidence and transparency. It also makes job roles appear more competitive to would-be candidates by allowing firms to include realistic salary details.
Best HR packages with compensation management tools
HiBob is an HR platform that covers a wider range of tasks, including compensation management.
Within HiBob’s Compensation Management solution, HR teams manage salary and variable pay reviews, equity and bonus allocation in one place. This platform gives a bird’s eye view of the various compensation processes and includes access to performance data, salary ranges, internal and external benchmarks and more.
Teams then use HiBob to plan, set up, and manage compensation cycles, and leaders from across the company can collaborate on these plans via shared worksheets. Elsewhere, the tools let multinationals or companies with employees spread across countries to set budgets in a single currency, but make compensation decisions in local currencies.
Sage People forms part of the wider Sage product suite. It offers compensation management as well as employee recognition tools, among other HR and talent features.
HR teams use it to track and manage salary, bonus, stock options, benefits enrollment and eligibility rules across all teams, including those in different countries. HR and people teams can also make sure they’re adhering to regulations around gender pay reporting, and use Sage People to generate the relevant reports.
You can then use the platform to plan and reward teams with salary increases and bonuses, displayed in chosen currencies, to meet specific business needs. It simplifies and automates benefits, including those provided by third-party providers, and shows how these benefits feed into an employee’s total compensation package. All with smart calculation tools and rate tables.
Workday Compensation brings together pay plans, grades and compensation data to create global compensation packages. It makes it easier to assign roles in certain regions to certain grades to make sure the packages are personalised. It then automatically triggers new compensation packages when people are promoted or switch to new locations.
Elsewhere, it combines salary survey data, finance data, cost of living data, to make pay increase and compensation recommendations as well as generate reports that track gender equity, as well as diversity and inclusion stats.
Frequently asked questions on compensation management tools
Yes: SAP’s SuccessFactors Compensation tool is a direct rival to six we highlight above.
While the HR team is historically responsible for managing people’s salaries and benefits, compensation management tools will generally need to implemented by the IT team.
Lattice describes itself as a “people success platform”. As part of this, it has a compensation management tool called Lattice Compensation.
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