How HRMS Helps with Compensation Management
What is compensation management?
Compensation management is a process that the human resources department undertakes to manage the salary, bonuses, and incentive structure of employees based on a careful analysis of employee performance and skillsets. Think of compensation management as a means to compensate your employees fairly and logically for all the work they put in, and the compensation is determined using a scientific approach in order to ensure every employee is fairly assessed.
Why is compensation management important?
Compensation management is important because it is directly related to your company’s ability to attract new employees, at the same time it is also related to how well your company can retain its top performers, and finally, it acts as a means to engage employees by offering competitive compensation plans.
In brief, compensation management allows your organisation to attract employees towards working better and increasing their output in order to draw better compensation opportunities.
What are the 8 objectives of compensation management?
As previously mentioned, compensation management is about ensuring your top-performing employees are fairly compensated for their contributions. At the same time, compensation management is about formulating compensation plans that are attractive and assist with acquiring new talent.
8 objectives of compensation management:
- Retain existing top-performing employees
- Attract new high potential candidates
- Establish a fair and transparent compensation determination process
- To boost the productivity and profitability of your organisation
- To keep a track of costs
- Promote competition among employees by the way of incentives and bonus pay-outs
- To create an image among competitors as a top paying company
- Ensure timely pay-outs of wages and salaries
What are the prerequisites to compensation management?
In order to set up a sound compensation management process, it’s important for your organisation to invest in the framing and drafting of sound compensation policies and practices that are transparent for every employee to study and understand.
Additionally, it is also important to invest in software that can manage the compensation determination process for your entire employee base, which can number from a hundred employees to many thousand employees.
Software to calculate and process fair compensation pay-outs is central to reducing the stress of determining the compensation that the HR department undergoes, especially when working with many employees. The best option, in this case, is to look for an HRMS with compensation management functionality built into it. An HRMS like Hoshi will assist your HR in saving time and costs and also ensure fair and accurate compensation determination month-on-month.
Why is an HRMS important for compensation management?
Well, compensation management is just a single feature among many features that an HRMS sports. However, it is advisable to opt for an HRMS with inbuilt compensation management because an HRMS is a powerful tool that also assists the HR department with payroll processing, attendance, time management, leave processing, and more. By investing in an all-rounded HRMS, your HR department can do a lot more than just manage compensation, which makes an HRMS with compensation management feature a very good investment for the HR department.
The time and age of processing compensation manually have reached their end. In an age where software solutions can simplify and automate most functions, calculating compensations manually will only add to the stress on an HR department. We at NeuralIT understand the need to assist HRs with processing compensation, as a result, our Hoshi HRMS is a powerful software that makes compensation management and processing easy to understand and execute for HRs of all business types and experience levels.
How do you set-up a compensation management process?
Understand Salary and Pay-out Structures
The best way to start with compensation management is by building a sound salary structure. A salary structure or pay-out structure encompasses two essential concepts under one term. The first is determining the salary or pay-out based on the type of job, designation, and industry. The second is determining how and when your employees are compensated, which also included the various components of their salary, incentive, and bonuses.
Update compensation plans based on global audits
It’s also advisable for HRs to regularly conduct a pay-out or compensation audit by comparing your company’s compensation plans with global standards, which mostly include other businesses from your industry and competitors. An audit helps your organisation understand if the current compensation plans are under or over the industry standards. It also assists your organisation in formulating the best compensation plan to attract new employees to join your business.
Apply a compensation policy
After steps one and two, it’s time to frame the compensation policy regarding salaries, bonuses, incentives, and pay-out procedures. These policies help your organisation maintain a transparent philosophy of compensation that is free for any employee to view and study. A strong policy ensures that compensation is fair and logical while making it easy for your HR department to process and calculate compensation for the entire employee-based with ease.
Design a compensation strategy
Once the compensation policy is determined, it’s time to determine the compensation strategy, i.e.: when will employees be paid their fair compensation. E.g.: salaries are paid on the 1st of every month; however, incentives are paid on the 15th of every month, followed by bonuses which are yearly pay-outs, and gratuity, which is paid at the end of a 5-year working term. A compensation strategy is important if your organisation does not want to place undue stress on its cash reserves while ensuring that it isn’t holding back on its employees’ money.
Assess the outcomes
Finally, compensation management aims to assist organisations with achieving the 8 objectives mentioned earlier. By studying if your organisation is able to achieve the 8 objectives or not, you can determine if there are any changes that must be made to your existing compensation plan. The idea is to assess results and make the needed changes in order to achieve the 8 important objectives of compensation management.
Concluding
Hoshi HRMS is a product designed and built by Neural IT to assist HRs of start-ups and small to medium businesses with a host of human resource management functions. Hoshi is an award-winning HRMS and is fully loaded with the most important features that an HR department may need all while the cost of licensing the Hoshi platform is attractive and competitive. To know more about Hoshi HRMS or to book a demo call, start out by filling out this form or write to us at
Hoshi by Neural IT is a cloud-based software helping simplify daily HR tasks. Digitise your HR function & let Hoshi empower HRs to easily onboard new hires, track employee progress, and analyse data to support employee development and organisation.
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