Online tools can drastically cut the amount of time HR spends on compensation administration
In many organizations, compensation programs, such as base pay reviews, incentive pay and equity/share-based programs, require a great deal of time and effort. Due to the complexity and manual nature of some of these programs, the amounts of money involved and the importance of compensation programs to employees, in some sectors and organizations up to half of an HR generalist’s time can be spent working on compensation programs.
At the most basic level, many organizations still use spreadsheets to administer compensation programs. Some of these spreadsheets are more sophisticated than others. Macros and formulas can be used to create spreadsheet applications that are quite sophisticated and robust. This type of solution can actually work quite well, especially for small- to mid-sized organizations with only one or two compensation programs in place. The larger the organization and the more varied and complex the programs, the greater the need for a more sophisticated tool — generally an online tool with distributed access for line managers, administrators, executives and HR.
Online tools allow managers to input recommendations directly into online worksheets and submit recommendations up the hierarchy for approval. Managers and executives are able to view their own worksheets as well as the worksheets belonging to the managers reporting to them and all of the employees reporting up to them. HR users would normally be granted access to the worksheets belonging to the entire organization, or, if they are aligned to specific lines of business, to the worksheets belonging to the managers and executives within that particular area.
One Canadian company that uses online tools is Scotiabank. A case study posted on the website for Authoria, a Waltham, Mass.-based firm that produces the Authoria Salary and Authoria Incentive tools, reports that Scotiabank was able to cut down on the amount of time required for administering the compensation program. According to Authoria and Scotiabank: “What once took well over one month and included many hours of overtime now takes only 10 business days.”
Any tool used for administering the compensation program on the part of line managers, executives and HR (whether spreadsheet-driven or online) would normally include the following:
•Overall budget (usually expressed as total dollars for incentive pay and equity program purposes, and as a percentage of total salaries for base pay ¬reviews).
•Current information about individual employees such as: name; employee number; salary; currency (if applicable); grade/level; full-time equivalent; compa-ratio; hire date; job title; job code; cost centre; manager’s name; and salary/incentive plan information (if applicable).
•Historical compensation information (usually going back two or three years) such as: incentive pay and equity program grant history; previous performance ratings; and base pay history (usually expressed as at the fiscal year-end).
•Fields for inputting actual compensation decision information. In organizations with a pay-for-performance philosophy, performance ratings (and performance multipliers/factors, if applicable) and incentive pay recommendations would normally be collected simultaneously. Base pay increase recommendations would normally be input either as percentages or dollars. Often the user would have a choice to use either method.
•Once information has been input into the system by the user, the tool should have a reporting function to produce relevant metrics, charts and curves at the appropriate level.
Whatever tool is used to administer the program, it would normally be integrated with the organization’s payroll/HR system, so compensation recommendations and performance ratings can simply be uploaded into the HRIS without having to manually key in the same data twice.
While some organizations conduct separate incentive pay/equity programs and base pay reviews at different times of the year, many companies review salary, conduct performance reviews and award bonuses simultaneously, usually to coincide with the organization’s fiscal year end. Organizations that conduct all of these programs simultaneously would normally opt for an integrated total compensation tool, so that all of the annual compensation administration for employees can be conducted simultaneously.
Brian Kreissl is managing editor of Consult Carswell at Thomson Carswell. He can be reached at [email protected] or visit www.carswell.com for more information.
At the most basic level, many organizations still use spreadsheets to administer compensation programs. Some of these spreadsheets are more sophisticated than others. Macros and formulas can be used to create spreadsheet applications that are quite sophisticated and robust. This type of solution can actually work quite well, especially for small- to mid-sized organizations with only one or two compensation programs in place. The larger the organization and the more varied and complex the programs, the greater the need for a more sophisticated tool — generally an online tool with distributed access for line managers, administrators, executives and HR.
Online tools allow managers to input recommendations directly into online worksheets and submit recommendations up the hierarchy for approval. Managers and executives are able to view their own worksheets as well as the worksheets belonging to the managers reporting to them and all of the employees reporting up to them. HR users would normally be granted access to the worksheets belonging to the entire organization, or, if they are aligned to specific lines of business, to the worksheets belonging to the managers and executives within that particular area.
One Canadian company that uses online tools is Scotiabank. A case study posted on the website for Authoria, a Waltham, Mass.-based firm that produces the Authoria Salary and Authoria Incentive tools, reports that Scotiabank was able to cut down on the amount of time required for administering the compensation program. According to Authoria and Scotiabank: “What once took well over one month and included many hours of overtime now takes only 10 business days.”
Any tool used for administering the compensation program on the part of line managers, executives and HR (whether spreadsheet-driven or online) would normally include the following:
•Overall budget (usually expressed as total dollars for incentive pay and equity program purposes, and as a percentage of total salaries for base pay ¬reviews).
•Current information about individual employees such as: name; employee number; salary; currency (if applicable); grade/level; full-time equivalent; compa-ratio; hire date; job title; job code; cost centre; manager’s name; and salary/incentive plan information (if applicable).
•Historical compensation information (usually going back two or three years) such as: incentive pay and equity program grant history; previous performance ratings; and base pay history (usually expressed as at the fiscal year-end).
•Fields for inputting actual compensation decision information. In organizations with a pay-for-performance philosophy, performance ratings (and performance multipliers/factors, if applicable) and incentive pay recommendations would normally be collected simultaneously. Base pay increase recommendations would normally be input either as percentages or dollars. Often the user would have a choice to use either method.
•Once information has been input into the system by the user, the tool should have a reporting function to produce relevant metrics, charts and curves at the appropriate level.
Whatever tool is used to administer the program, it would normally be integrated with the organization’s payroll/HR system, so compensation recommendations and performance ratings can simply be uploaded into the HRIS without having to manually key in the same data twice.
While some organizations conduct separate incentive pay/equity programs and base pay reviews at different times of the year, many companies review salary, conduct performance reviews and award bonuses simultaneously, usually to coincide with the organization’s fiscal year end. Organizations that conduct all of these programs simultaneously would normally opt for an integrated total compensation tool, so that all of the annual compensation administration for employees can be conducted simultaneously.
Brian Kreissl is managing editor of Consult Carswell at Thomson Carswell. He can be reached at [email protected] or visit www.carswell.com for more information.
