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PayScale Brings ROI With Compensation Management Software

To help businesses realize the full impact of better compensation management and communication, PayScale commissioned Forrester Consulting, an independent research firm, to conduct a study evaluating the total economic impact of PayScale. This blog post is an excerpt from the study. You can download the full study here.  

In a previous article, we shared with you the journeys of five organizations, including how and why they decided to bring a modern compensation management solution into their organization. In this article, we’ll highlight some key results these organizations have achieved using two of PayScale’s software-as-a-service (SaaS) solutions — PayScale MarketPay and PayScale Insight.

A quick recap on why these organizations decided to investigate compensation management solutions and their selection criteria:

  • Save time on comp work — help manage and speed up the logistics of salary survey response, submission and review.
  • Get accurate data to make better pay decisions, which in turn leads to reduced turnover, reduced recruiting costs and greater employee satisfaction.
Accurate data leads to better pay decisions, which reduce turnover and costs.Click To Tweet

Key Results

  1. Data integrity

Whether data has been aggregated from multiple salary surveys or crowdsourced through PayScale’s employee survey, salary data is more detailed and accurate. Salary review processes are quicker, and questions about the validity of the data are reduced.

“Whenever I’ve done market pricing at other companies, I’ve always felt like if I could match about 80% of the jobs to market data in the surveys, I was setting up a really good foundation. Well here, I’ve been able to find good solid matches for about 90% of the jobs or more,” said a compensation analyst at a healthcare service provider.

The compensation director for a professional and technology services organization added, “We have added new global offices over the last two years, and we’ve completely relied on MarketPay to build those models to assess impacts on our employees, to adjust them, to plot jobs and to price jobs in those new locations.”

“The biggest business operations benefit that I’ve seen is the consistency in benchmarking positions,” according to the Director of Compensation at a private university.

  1. Reduced turnover and recruiting costs

Even a small reduction in turnover can be very significant. For example, 3% is 120 employees at a 4,000-employee company. While compensation does not cause every departure, underpaying or poorly communicating compensation does lead to higher turnover.

With PayScale, identifying employees paid well below the market (for their role and location) is easy, so organizations can take corrective action. When the pay gap is closed, employees who previously considered a job change end up staying. Reducing turnover over means that fewer job openings are available that need to be recruited for and filled, saving costs in those areas.

Because PayScale provides accurate comp data, organizations can set pay more accurately for their specific locations and industry. These lead to quicker hiring cycles and higher offer acceptance rates. According to Forrester’s TEI model, the three-year present value of this benefit is nearly $2.1 million.

  1. Reduced survey management time

Compensation surveys can be extremely helpful, but compiling data into the right format to submit, as well as reviewing the data, can be a very time-consuming process. By automating the process using PayScale MarketPay, what used to take a full week can be now completed in less than a day. The three-year present value (PV) of this benefit is about $17,000.

  1. Reduced time spent on ad hoc survey review requests

Managers often have questions about compensation as they consider new job candidates, write a new job description or conduct current employee reviews. These ad hoc requests add up and can consume a bulk of departmental resources for a compensation manager. PayScale solutions help reduce the time it takes to review each position. The three-year PV of this benefit is more than $40,000.

By reducing survey time management time and time on ad hoc survey reviews, current compensation team members are able to complete current tasks more quickly and have spare time on strategic projects. One avoided full-time equivalent (FTE) in the second year adds up to a three-year PV of about $123,000.

  1. Improved transparency and employee satisfaction

Employees feel more appreciated working for a firm that puts a priority on paying them a fair wage and that can have fact-based discussions about pay.

What’s the ROI?

Forrester’s financial analysis found that a composite organization, based on these five interviewed organizations, experienced a PV benefit of about $2.3 million over three years versus PV costs of $653,000, adding up to a net present value (NPV) of more than $1.6 million and an ROI of 249%!

Want to get more details on the benefits, costs and risks associated with investing in a compensation management solution and determine the ROI for your organization? Download the full report here.

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What’s the trickiest part of the compensation planning process for your organization? We want to hear from you. Tell us your story in the comments.

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