Many small and medium-sized organizations have been slow to adopt technology and continue to rely on elaborate spreadsheets and manual processes for their yearly pay planning and merit-based appraisals. This manual process is both inefficient and error-prone. In this day and age, using manual processes is a disservice to employees working for the organization. They deserve better.
Spreadsheets are inefficient
Simple steps like a manager recommending employee merit increases is a cumbersome manual process that is vulnerable to security breaches. We have seen HR administrators employ additional staff during the merit cycle to handle the manual process. Tracking and completing the budget distribution process and merit increase becomes laborious.
Spreadsheets are error-prone
We have seen our customers, before implementing our compensation software; accidentally send the wrong file to an employee, thereby disclosing another employee’s salary details.
Information as needed
HR managers and compensation analysts who are responsible for pay planning will need summary reports and audits at regular intervals, to understand the consequence of decisions. This lack of timely information can affect employees understanding of the compensation philosophy and could drain thousands of dollars through lack of insight. Spreadsheets are not inherently sophisticated enough to provide just in time reports for analysis. This ultimately leaves the executives ill-informed about key organizational metrics.
Changes from last year
The annual pay process changes year to year for many organizations. New policies, merit calculations, approval processes and hierarchies will be introduced which may be different from the previous year. Without a compensation tool, just using spreadsheets and the manual process would mean HR administrators will have to explain and answer questions related to new changes over and over again to their employees.
Some salary actions that may have happened without proper approvals cannot be tracked effectively through a manual or spreadsheet base process. A good compensation tool with an audit feature will give help keep check of such infringements.
Touch point with other departments of the organization
Annual pay process touch all the departments of the organization, i.e. payroll processing department, finance department etc. A good compensation tool reduces errors and the effort required to interface with each of the touch points.
Despite all the above factors, still many organizations continue with manual process and spreadsheets. We believe that the following are the reasons why this is still happening –
1. Fear of the unknown
Many HR administrators that are responsible for pay planning are comfortable with spreadsheets as they have been using them for years. They rely on their macros and formulas to get the job done, but spreadsheets alone are not enough. There will be lots of physical paperwork that needs to be done to get the pay planning, distribution of budget and merit increase finalized.
The cost-benefit on using a compensation tool is very high in comparison.
Though compensation software and associated technologies are not expensive these days, many HR administrators are reluctant to spend money on an annual process. This could be because HR departments in many organizations are still seen as a cost center instead of a source of actionable insights for smart growth strategies.
These are expensive tools when compared to ones that will just suit a company’s budget. However, we can tell you, the cost will be worth it.
3. Learning curve
Often, new software means training the line managers to learn the software, doing trial runs, and putting a help desk to respond to queries and errors. Some HR administrators see this as a long learning curve. But today, most HR software offerings are designed for simplicity and intuitive. Good support is typically available to guide and HR and to respond to any queries. So this fear that implementing compensation software requires a long learning curve is perhaps outdated.
The learning curve is usually short and, in our experience, much less time-consuming than the old manual process.
Recent trends have shown that organizations are spending more on compensation software and HR technology. This trend is irreversible. So if you are an HR administrator or compensation analyst using the manual process, now may be the time to take a good look and move to compensation software at the earliest.