HR Enterprise Compensation Management is a HR software module that allows private enterprises to better and more efficiently define and implement a performance-based compensation program that spans the whole enterprise.

According to SAP, the main components of a complete compensation management solution are:

compensation administration, long-term incentives, budgeting and job pricing. Other factors include age and weight market data, in which it is possible to compare internal and external pay and adjust an enterprise’s pay structure if necessary.

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However, there are some challenges to successfully implementing effective compensation management solutions. For one, cash compensation programs are based around paying employees’ productivity. Therefore, this places the responsibility of compensation management in a company’s finance department. Alternatively, these compensation programs are interwoven with talent strategies, therefore making HR and executive management responsible. The following tips will help a company balance these two domains for exceptional business performance:

As Performance Levels Differ, So Will Compensation

According to various research studies, there is a strong correlation between a company’s performance and its differentiated compensation programs for high-performing employees. As a consequence, this kind of compensation approach brings with it dizzying complexity; rarely do compensation technologies offer the kind of flexibility necessary to properly track and apply all the important variables that should ideally be accounted for. Compensation solutions will be especially valuable in those specific areas needing to focus on compensation investments. Those companies that have successfully implemented these solutions have seen 20% greater revenue and profit than companies in the same industry. And this is in spite of the challenges that it poses.

Talent Retention

In 2016, the job market is tough and unemployment is high. While it may seem that this calamity brings with it a surplus of talented labor, one must understand that there are two distinct types of workers in the job market: commodity workers and pivotal talent. “Commodity Workers” are those that are not specialized in their skill-set and are the ones who occupy less prestigious positions in companies, and are therefore more expendable. “Pivotal Talent” is made up of workers who have skills and competencies that are the most valuable for companies. These kinds of workers are always in high demand and often receive employee recognition. A differentiated compensation program are invaluable when it comes to long-term Pivotal Talent retention. A comprehensive performance-driven rewards program will lower the risks in case these positions are open too soon. With the use of these programs, companies will be able to carefully and methodically budget for this valuable group of workers. Compensation solutions will create the flexibility needed during these changing economic times and help to quickly and efficiently re-calibrate their compensation programs as budgets inevitably fluctuate.

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Compensation Solutions for the 21st Century

Companies have moved from the more traditional Pay-for-Performance culture to Pay-for Contribution—wherein employees are compensated for adding more value than their basic job description—and Pay-for-Potential—rewards based on possible future contributions—style of compensation. Enterprise compensation solutions will help companies design and implement these complex compensation plans that evolve and adapt.

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Incentive Compensation Becomes Painless and Automatic

Enterprise compensation solutions are able to lower or even eliminate the use of spreadsheets—the production of which tends to be a slow, error-prone, manual process that takes too much time and money. By using compensation solutions, organizations are able to automate both calculations and incentive payment processes. In turn, pivotal, as well as accurate, compensation data will be more quickly delivered to key personnel such as managers, executives, and sales reps. This frees up time to focus on actually selling and managing.

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Easier To Plan for the Future

Compensation solutions, with all its automation and quick delivery of data, give compensation analysts the opportunity to rapidly alter their plans for the next few months of operations. Likewise, with such a comprehensive view of both sales performance versus incentives paid, this valuable data will help managers lead their employees to accomplish a company’s strategic goals and objectives. Not only leaders, but employees of all ranks will be able to carefully go over and contribute to the criteria that drive their compensation bonuses.

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More than ever, employee efficiency and cost reduction are the top priorities for many different companies. These applications offers companies a high ROI. Calculation errors, simple mistakes which are a natural part of manual processes, will cease to exist with the use of compensation solutions. It will lower incidents of compensation overpayment, which in turn will lead for immediate and more abundant cash flow for an enterprise. Productivity will explode across the board, not just with the HR department, but with workers who receive variable pay since payouts will be exact, traceable, and automatically adjustable.

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