Finding the right compensation management software can be exhausting. 

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With so many platforms to choose from, each offering a different set of features and functionality, identifying the one can feel like a second job.

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But, as discussed in our previous post on the ROI of CompTech, this kind of software isn’t an operational expense, it’s an investment in turnover prevention.

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Keep reading to learn how to successfully select a compensation management solution.

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Want all the details on compensation management tools and how to assess which is the best fit? Download our free buyer’s guide today!

Conduct a Compensation Needs Assessment 

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Below are questions and insights to help you clarify problems and identify solutions. 

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These questions are organized based on typical compensation responsibilities and will help you determine if the potential solution will support you in:

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• Accessing compensation data
• Managing pay ranges 
• Administering raises and promotions 
• Communicating compensation plan details

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Let’s start with the foundation of any effective compensation program – compensation data. 

1. Compensation data 

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Making compensation decisions without comprehensive data is like navigating without a GPS. Find accurate and relevant market data providers by assessing the following: 

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• Does the vendor have relevant job and location coverage? Consider where you hire (domestic or international) and which titles are most important to you.
  
  
• How often is the data updated? Stale market data doesn’t support robust compensation planning processes. Yet, many compensation data providers, like survey data vendors, only collect and publish data a few times a year. Look for a solution that offers real-time data.
  
  
• How does the vendor show confidence in the quality of data? Ask to see confidence ratings to ensure you’re using top-tier data in your compensation processes. Data that hasn’t been vetted leads to shaky compensation decisions. 

2. Market pricing

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To set pay ranges, you must combine data sources and gather insights on market trends. Evaluate potential compensation management software using the following pricing functionality questions:

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• Will this solution help house my pay ranges or generate them? Creating pay ranges is a manual process for most Total Rewards and HR teams. Identify if your potential vendor will store your ranges, or if they’ll provide the tools to help reduce your workload and effectively create pay ranges.
  
  
• Can I connect data and ranges to planning? Unifying data and compensation planning in one place boosts efficiency. Look for a compensation management tool that aggregates disparate data.
  
  
• Does the vendor support complex pricing processes? Some compensation management solutions, like HRIS systems, only support basic pricing workflows. If you have a larger team or more complicated compensation processes, you need to ensure your potential solution supports those complexities.

3. Compensation planning

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Administering raises and promotions is nuanced. HR and Total Rewards teams need to find solutions that support their unique processes by considering the following. 

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• What systems are you pulling data from for merit cycles? Leveling up your HR stack can save you time and reduce errors. Look for a solution that works seamlessly with other tools like your HRIS system and cap table software. 

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• What do you want managers to see? You need permissions so only the right people see sensitive info about employees. At the same time, transparency is critical. If you don’t give your managers some discretion around compensation planning and communication, they will feel disempowered.
  
  
• What do you want to do differently in your next merit cycle? As your company iterates on its philosophy and improves how it plans and communicates compensation, it’s important to consider your next chapter.

4. Communication

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To avoid confusion around pay, clear and effective communication is a must. Consider how you want to approach communication, and how compensation management software can help.

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• How are you communicating compensation information to employees? A common complaint about comp is that there’s often an inconsistent narrative between HR, recruiting, candidates, and the rest of the team. Assess what’s working and what isn’t in your current communication plans, and filter your compensation management software decisions around the platform that best helps you improve.
  
  
• What is your current way of showing offers? ‍If your candidates don’t understand the upside of their job offers, you need to educate them. Compensation management software is a powerful tool for decreasing offer decline rates and giving recruiters and hiring managers a leg up on the competition.

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• How are you educating employees on equity? Consider what level of information you want to provide employees with. Some solutions provide high-level visibility and others dive into the details and nuances of equity compensation programs.

5. General concerns 

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Outside of the usual compensation planning activities, there are other compensation management software considerations to make, such as:

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• Which team members are involved in comp? Depending on your headcount and org chart, you may have team members in People Operations, Total Rewards, and Finance involved in compensation planning. Consult the necessary parties to ensure you’re selecting a tool that fits the entire team’s needs. 

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• Which data security and privacy issues matter most to you? Your compensation management software should be SOC2 Type II compliant, follow GDPR best practices, and the data should undergo quarterly penetration testing.
  
  
• What customer support services are available? Some compensation management tools require more hand-holding than others. Identify which features are self-serve, where you’ll need more help, and how much guidance the vendor will provide. 

Find the Best Compensation Management Software 

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Choosing compensation management software is easier said than done. 

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Start with these 15 questions to vet potential vendors, and for more information, download our complete compensation management software buyer’s guide. It explores additional questions to consider and dives into the ins and outs of the compensation management landscape. 

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Get the free guide. 

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