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Compensation management is a complicated process that requires you to collect compensation details, apply taxes and benefit deductions, and ensure payroll compliance. A compensation management system automates these processes, thereby simplifying tasks and improving the accuracy of calculations.
To help you make an informed decision on a compensation management software purchase, we’ve answered some essential questions related to compensation management software:
Compensation management software allows businesses to administer and manage wages and salaries of employees, freelancers, and contract workers. The software helps users calculate employee salaries, manage bonuses and benefits, and track total business costs spent on employee salaries.
Compensation management software is typically offered in two deployment models:
Cloud-based deployment: These solutions host your data on the vendor’s server infrastructure so you don’t have to purchase the equipment on your own. These systems offer subscription pricing and typically charge you on a per user, per month or per-month basis. You can access the software using a web browser or mobile app.
On-premise deployment: Unlike cloud-based systems, these systems host data on business-owned servers. This means that you’ll have to purchase, set up, and maintain servers for data processing and data storage. On-premise systems are accessed via an installed application on your computer. Pricing for on-premise systems is usually on a per-user license basis. Apart from that, you may also need to purchase updates periodically.
Key question to ask a vendor before you buy: What is the total cost of ownership (TCO) per year?
The next step is to learn about the key features of a compensation management system. This knowledge helps you select products based on your specific payroll requirements.
The following are common features of a compensation management software:
Compensation calculation: Define formulas to calculate the different components of an employee’s compensation package. For instance, you could define salary calculation rules for leave, overtime, and bonuses.
Compensation records: Add, delete, and update employee and payroll information in the database. You can revise salaries based on annual appraisals, promotions, and tax changes.
Compensation reporting: Generate reports on employee compensation such as monthly reports on the total cost of salaries.
Budget control: Set a salary budget for a payroll period and receive alerts if your payroll costs exceed the stipulated budget.
Budget management in Willis Towers Waters Compensation Software (Source)
Key questions to ask a vendor before you buy: Apart from these features, which other features does your product offer that could be useful in my business? What new features are you planning to introduce in the future?
*Note: The applications selected in this article are examples to show a feature in context, and are not intended as endorsements or recommendations. They have been obtained from sources believed to be reliable at the time of publication.