Compensation systems starting to pay off

Newer technology makes compensation easier, accurate and reduces HR’s workload
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/29/2007

Visions of multi-page compensation spreadsheets clogging the desks and monitors of managers and HR staff are disappearing as technology continues to evolve.

“The same thing that allows centralized benefits administration, automated or web-based recruitment programs, that same kind of revolution, is in compensation as well,” says David Borrebach, a Philadelphia-based senior consultant with the Hay Group, a management consulting firm. “What that means is the Internet is being tapped, every year more effectively, to help us automate and rethink the fundamental ways we’re doing compensation tasks.”

That’s something Barb Conway, vice-president of HR at Thomson Carswell, has seen first-hand. The Toronto-based legal, finance and HR publisher, which has about 600 employees (and publishes

Canadian HR Reporter

), started using a web-based compensation planning tool more than a year ago, giving managers access to this kind of technology for the first time.

“Previous to that, like most organizations, we’d do a download from our human resource management system (HRMS) and basically create Excel spreadsheets and do a lot of formatting, put in formulas and send those out to hiring managers to complete and send back,” says Conway. “Then those increases would be keyed manually into our payroll HRMS. Over the years, we got it to as an efficient process as we could but it was still limited. It meant involvement from an HR compensation manager’s side in terms of creating those spreadsheets, which could take a good two days solid.”

Now managers can go in and pull up their people, see historical information and past increases and put proposed increases right online, which are submitted automatically for approval. Once approved and rolled up through the organization, the increases are fed automatically through the HRMS and into the payroll tool.

Some hiring managers participated in pilot groups to evaluate the tool and give first-hand feedback and there were web training sessions and training guides provided, but Conway says the system is so intuitive, training is not really required.

“It’s a very straightforward and intuitive kind of tool,” she says. “It saves a lot of HR, manager and payroll time to do it so it really does create efficiency as one of the big drivers.”

The new system also lessens the probability of error, she says, as manual downloads can often lead to data being sorted the wrong way or deleted accidentally. Now a manager can still make mistakes but, with an automated process, there’s much less opportunity throughout the workflow for error.

Another bonus of the new technology is it automatically produces individual compensation statements to give to an employee when communicating an increase. Previously the company had to create its own program to pull those kinds of things or employees just didn’t receive them, she says.

“It makes the input process much more efficient, the approval process more automated and efficient, the employee communication better. Everybody’s doing it the same way, it’s all being driven from the same system, the approval process, so there’s better accountability built in.”

Compensation technology is of particular value when it comes to performance-based pay, says Donna Ronayne, vice-president of marketing and business development at Halogen Software in Ottawa, a provider of employee performance management solutions. For example, if a company is interested in increasing base pay, it can use a merit matrix based on appraisal scores.

“You want to make sure your merit-based pay is valid and reflective but not crazy,” she says. “You have the ability to create the pay bands and import market data. The system will automatically calculate an increase based on the appraisal score.”

Another way to reward employees is creating different levels or “bonus profiles,” she says, which involve payouts for special projects or notable performance. A system can automatically recommend increases and managers can accept them or override them. Anything outside company policy around compensation is flagged, and can even be restricted, so when it goes in for final approval, a senior manager can look at these exceptions and ask for an explanation.

“It helps provide total visibility into what everybody is doing and provides some control,” says Ronayne.

The technology also rolls up all the budgeting at the same time, so a manager can immediately see the impact of an increase for an employee. And as part of a talent-management suite, top-level managers can drill down and see what their subordinates are giving to their subordinates, looking at past appraisals, goals and objectives (and if they were met), and even notes on an employee.

“If you have everything at your fingertips, you’re not guessing, ‘Did they have a good year?’” says Ronayne.

The system is also much easier in that it automates budget approvals. While a company may decide to give a corporate-wide three-percent increase, it’s up to the manager to decide how to distribute that and the system recommends, based on the scores, what it should be. The manager can override these to a point, so there is some flexibility, she says. At the end of the process, once all the adjustments are made, with a push of a button, it’s all exported into payroll.

“It provides some added checks and balances. It’s a retention tool because employees feel for the first time it’s fair and accurate and can be checked. It builds confidence in your pay for performance, that there’s no nepotism or favoritism, it’s a systematic thing that managers and senior-level managers have to sign off on. You can’t get away with stuff,” says Ronayne. “Employees appreciate it more than anybody and managers appreciate it too because it makes their work easier if everything is calculated for them.”

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