5 Tips to Buying Compensation Management Software

Financial incentives help organizations attract and retain employees, but as an HR, rewards, or compensation professional, you want to feel confident that you’re rewarding your best people and that your pay for performance strategy aligns with business results. The HR function needs to become increasingly strategic to address modern business challenges—but manual processes and spreadsheets can only get you so far.

Managing compensation with spreadsheets demands hours of manual input, risks personal information ending up in the wrong inbox, and results in fragmented data with minimal insights. By using a single source of reliable data, you can align compensation with top talent and business metrics, make complex calculations to drive salary and bonus outcomes, and create multiple templates for compensation statements—making sure employees understand how their pay was determined.

As a result, many leading organizations are ready to ditch messy spreadsheets and decide to invest in compensation management software. Choosing a compensation management solution can be daunting and challenging to get buy-in from decisionmakers who may need to be convinced that there’s a better way than their familiar methods.

We’ve put together five key tips to help you build your business case, define your requirements, select the right vendor, and deliver success:

  1. Understand the benefits a leading technology solution can offer
  2. Decide what you need
  3. Engage all stakeholders
  4. Consider organizational readiness
  5. Undertake a thorough vendor assessment

Tip 1: Understand the benefits a leading technology solution can offer

Compensation management software allows companies to make stronger strategic decisions around pay, so that they can better attract, retain, and engage the talent they need to meet their business goals. A good place to start when considering your own business case is to understand the benefits a compensation management software solution will bring to your organization and how these are specifically aligned to the business needs. How will it support your compensation strategy for the short and medium term? We have summarized some key benefits here:

  • Drive efficiency by delivering streamlined processes for administering compensation, reducing cycle time and resources required
  • Improve effectiveness by providing a clear line of sight between employee achievement and business outcomes
  • Ensure equity by ensuring allocations are rewarded fairly and consistently
  • Manage compliance with intuitive functionality ensuring you enforce your compensation principals and guidelines throughout your allocation process
  • Manage risk with complete confidence through automating complex compensation calculations and secure data management

Additionally, the right compensation management software should provide many other additional benefits including: third party data integration, data integrity, automation of complex compensation calculations, ease of use for system administrators, full audit trails, flexible automated workflows and clear communications at all appropriate levels.

Tip 2: Decide what you need

The most common mistake when considering purchasing a compensation management software solution is not detailing your requirements at the outset. This can often lead to you choosing an inferior product and ultimately having to adjust your compensation processes to ‘fit’ the way the software works. This can happen when an organization selects a broader HR product suite or ‘all-in-one tool, rather than a specialist provider.

And while it might seem time-consuming, allocating sufficient time to detail how you currently run processes together with your compensation plan rules will save you time and money in the long run. But don’t just look at how you do things today, take the opportunity to review how your compensation strategy might change in the future. This can be helpful in justifying your business case if your investment can also help support future compensation plans and policies.

Before completing your requirements, don’t forget to embrace the opportunity that a technology solution can provide and be ready to adapt current processes to leverage these (too many buyers dismiss a solution because it does not “match” their current process). In doing so, organizations lose sight of the opportunity to streamline and simplify their compensation processes. Asking potential compensation management vendors to run a workshop with you will help you to utilize and understand their expertise in automating compensation processes, and may even help you distinguish the true compensation experts to partner with.

Ultimately, a clear set of requirements will help you to assess vendors thoroughly and build your business case.

Tip 3: Engage all stakeholders

All too often, selecting a compensation management solution happens within the confines of the HR function. It generally begins with HR pain points; the rewards team is tired of exporting and merging data from different systems or different versions of spreadsheets as managers make changes at the same time in various docs.

To guarantee successful adoption, you need to engage all stakeholders and ask them what they also want out of the compensation solution. It helps to understand the key benefits for different stakeholders which we have outlined below:


  • Feel empowered to make informed pay decisions
  • Provide decision support and actionable insight
  • Use automated workflow to speed up and drive the approval process

Human Resources:

  • Streamline compensation planning cycles
  • Shift focus to outcomes and more value-added tasks
  • Have real-time oversight of live process
  • Ensure governance


  • Gain transparency and consistency around pay determination
  • Achieve clearer communication on award outcomes
  • Ensure top performers are appropriately rewarded

Execs and Rem Committee

  • Have transparency on pay allocation relative to business goals
  • Ensure strong governance, budget adherence and risk alignment

Tip 4: Consider organizational readiness

The adage “timing is everything” is never more apt than when selecting a compensation management software solution due to the cyclical nature of the processes the technology will support. Always be realistic about implementation timelines and make sure you have enough time to conduct thorough user testing well in advance of your compensation cycle kick-off so there aren’t too many competing priorities for you and your rewards team to manage. It is possible to define your requirements and select a solution in the window between annual compensation processes, but always factor in time for contractual and technical assessments that are not under your control.

And never underestimate the impact of data for implementation success. Clearly understand if you are data-ready and the impact this may have on your delivery timescale. Compensation management solutions often require data inputs from multiple sources; employee data from your HRIS, performance and financial data for incentive plan calculations, and market data for benchmarking and peer comparison. Drawing up a data checklist will help you catalogue how data-ready you are.

Tip 5: Undertake a thorough vendor assessment

Increasingly, many companies choosing to implement compensation management software use a request for proposal (RFP) process, often supported by their in-house procurement team. This approach does ensure you address all issues in a timely and consolidated manner. The majority of solid RFPs cover:

  • Security and technical considerations
  • Detailed functional requirements
  • Pricing and contractual issues
  • Understanding of vendor strategy and roadmap

However, bear in mind an RFP is often ‘gamed’ by vendors with a tendency to say “yes” to every functional requirement you have specified, and those who have been honest about their product’s capabilities are penalized. That is why organizing a thorough software demo as a follow up is critical. Ask each vendor to show you exactly how their solution can meet your functional requirements and consider providing use cases for them to demonstrate.

Payscale supports the full compensation cycle

As mentioned above, choosing compensation management software can be time-consuming. So much so, that sticking with the current approach may feel like the safer choice. However, following these five tips will help you gain internal champions for your business case and ensure you can reap the benefits of the right compensation management solution for your business.

The right compensation management software could help you save your own time, money, and take the guesswork out of your pay processes. This could result in huge improvements in your employees’ productivity and happiness, your team’s goals, and your company culture.