---
title: What Is Compensation? | Compensation Software | Employer Pass
description: Compensation management is vital for corporate and employee growth from managing employee merit increases to potential decreases, bonuses, and more.
image: https://www.employerpass.com/hubfs/compensation-featured-image.jpg
---
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# What is Compensation Management?
- Employee Management
- Compensation Management
## What is Compensation Management Software?
In today's day and age, there is no need to manage compensation the old-fashioned way with cumbersome spreadsheets and manual approval processes. In order to streamline the entire compensation management process with guidelines for budgeting and modeling to routing programs for approval, employers need a compensation management system.
Compensation management is vital for corporate efficiency, growth, and organization. Processes include managing employees’ base pay, overtime pay, bonuses, and non-monetary rewards. Compensation management coincides with [benefits administration](https://www.employerpass.com/benefits-administration), as it involves creating and managing pensions, savings plans, vacation and sick days, and health insurance.
Using compensation management software significantly reduces error-prone data entry, as well as provides ready access to employee profiles and performance history, helping with improving data consistency. As a result, reduced administrative burdens, improved corporate governance, more equitable distribution of rewards, and greater control over your compensation spend.
## Compensation Management - Why Is It Important?
Compensation management can be tedious and time-consuming. Cumbersome spreadsheets, manual approval processes, and emailing worksheets back and forth is not efficient and leaves too much room for error.
However, without compensation management, businesses cannot continue to grow and maintain compensational effectiveness and fairness. Prospective employees seek out companies with competitive compensation packages, and with our software, you can improve and upgrade your management system.
## Compensation Management System Requirements
Trying to manually manage compensation planning across your workforce's business units and cost centers is tedious and too many errors can be caused in the process.
Your managers must have the proper workforce management tools such as compensation management software, but you should also know what to look for when selecting a compensation management system.
You need to know what employee compensation management system requirements are essential for success.
Here are some features to look for in an employee compensation management software solution:
## Employee Compensation Software Features Every Solution Must Have
When selecting an employee compensation management software solution, managers should look for the following tools and capabilities:
- Automated tools & workflows to streamline compensation planning.
- Compensation rules and guidelines allow the enforcement of fair, equitable compensation decisions across the organization.
- Seamless integration with HR and payroll software to reduce error-prone data entry.
- Ready access to employee profiles and performance history.
- Model compensation scenarios to optimize labor spend.
### Objectives of Compensation Management
Here are a few things effective compensation management solutions should help organizations accomplish:
- Setting up annual or non-annual compensation cycles quickly and easily.
- Providing a framework for off-cycle salary increases for merit or
promotion-based increases.
- Defining eligibility and managing compensation plans that cross multiple business units.
- Making it simpler to award pay increases and view accurate current, date-audited compensation data.
### Integrating Compensation Management With Other Workforce Management Solutions
Compensation management solutions, typically an add-on to an [HR solution ](https://www.employerpass.com/human-resources)or [payroll software](https://www.employerpass.com/payroll-software), should automate and streamline the entire compensation management process — from defining programs and guidelines to budgeting and modeling to routing proposals for approval, all while improving compensation data consistency and reliability.
With compensation management software, you should have robust decision-making tools at your fingertips and better visibility into all phases of the compensation planning process.
It is also essential for compensation management software to integrate with [performance management software](https://www.employerpass.com/performance-management) and [succession planning software](https://www.employerpass.com/succession-planning) as both employee performance and succession planning are directly correlated with compensation.
## Compensation Management Software Advantages & Benefits
Employee compensation management software can provide the following benefits for businesses utilizing such a system:
Set Up Compensation Cycles
Set up compensation cycles with remarkable ease and speed. Define the program type, enter the start and end dates, assign a cycle manager, and specify the employee type to be included, such as hourly, salary, seasonal, or executive. The application supports annual, nonannual, cycle-based, and off-cycle merit and promotion-based salary increases. Effectively tie compensation to individual accomplishments and contributions to support pay-for-performance.
Define Budgets for Each Compensation Cycle
With our compensation management system, you can define the budget for each compensation cycle using intuitive, spreadsheet-like interfaces. Further, our software supports both top-down and bottom-up budgeting processes - with appropriate approval workflows - and your choice of salary structure.
Model Compensation Scenarios to Optimize Your Labor Spend
Managers can use model compensation scenarios for their direct reports using the application’s built-in worksheets. Additionally, managers can enter merit increases by percentage or flat amount and see how much of the budget has been allocated in real-time. With the use of pre-configured budget guidelines managers can get help allocating increases in alignment with the corporatewide compensation strategy to support equitable rewards and minimize overspend.
Drive Efficiency From Start to Finish
Keep the process moving forward with proposed increases that are automatically routed through configurable approval workflows. Managers can review and approve increases for all employees with the “mass finalize” function.
### Other Employer Management Insights
- [Employee Scheduling](https://www.employerpass.com/employee-scheduling)
- [Time & Attendance Management](https://www.employerpass.com/time-attendance-software)
- [Absence & Leave Management](https://www.employerpass.com/leave-management)
- [Performance Management](https://www.employerpass.com/performance-management)
- [Compensation Management](https://www.employerpass.com/compensation-management)
### Ready to Begin Your Search for Compensation Management Software?
Find a Compensation
Software provider below!
[](https://cta-redirect.hubspot.com/cta/redirect/4903907/e0ee696f-0cd6-4ba3-ac47-6725b05399ed)
## See How to Eliminate Payroll Errors, Compensation Issues, and More
Download our [free factsheet](https://www.employerpass.com/reducing-payroll-errors-whitepaper) to learn more about [reducing payroll errors](https://www.employerpass.com/reducing-payroll-errors-whitepaper).
[](https://www.employerpass.com/reducing-payroll-errors-whitepaper)
[](https://cta-redirect.hubspot.com/cta/redirect/4903907/c28988ec-f9e3-41f4-aaf6-e848d294ec9d)
[](https://www.employerpass.com/reducing-payroll-errors-whitepaper)
## See How to Eliminate Payroll Errors, Compensation Issues, and More
Download our [free factsheet](https://www.employerpass.com/reducing-payroll-errors-whitepaper) to learn more about [reducing payroll errors](https://www.employerpass.com/reducing-payroll-errors-whitepaper).
[](https://cta-redirect.hubspot.com/cta/redirect/4903907/c28988ec-f9e3-41f4-aaf6-e848d294ec9d)
## Other Employer Areas of Interest
### Payroll
- [Payroll Basics](https://www.employerpass.com/payroll-the-basics)
- [Payroll Software](https://www.employerpass.com/payroll-software)
- [Payroll Outsourcing](https://www.employerpass.com/payroll-outsourcing)
### Human Resources
- [Core HR](https://www.employerpass.com/human-resources)
- [Employee Handbooks](https://www.employerpass.com/the-employer-guide-to-employee-handbooks)
- [Recruitment & Talent Acquisition](https://www.employerpass.com/talent-acquisition)
- [Employee Onboarding](https://www.employerpass.com/employee-onboarding)
- [Succession Planning](https://www.employerpass.com/succession-planning)
### Insurance & Benefits
- [Employee Benefits Administration](https://www.employerpass.com/benefits-administration)
- [Workers' Compensation Administration](https://www.employerpass.com/understanding-workers-compensation)
---
## Ready to find the provider of your dreams?
Give us some basic information about yourself and your business goals, and we'll find a provider who is customized to your unique business situation, be it industry, locale, etc.
### About Us
We connect businesses with the industry's leading, independent providers of ***employer** *services - everything from payroll to human resources and employee benefits.
### Payroll
- [Payroll Basics](https://www.employerpass.com/payroll-the-basics)
- [Payroll Software](https://www.employerpass.com/payroll-software)
- [Payroll Outsourcing](https://www.employerpass.com/payroll-outsourcing)
### Human Resources
- [Core HR](https://www.employerpass.com/human-resources)
- [Employee Handbooks](https://www.employerpass.com/the-employer-guide-to-employee-handbooks)
- [Recruitment & Talent Acquisition](https://www.employerpass.com/talent-acquisition)
- [Employee Onboarding](https://www.employerpass.com/employee-onboarding)
- [Succession Planning](https://www.employerpass.com/succession-planning)
### Employee Management
- [Employee Scheduling](https://www.employerpass.com/employee-scheduling)
- [Time & Attendance Management](https://www.employerpass.com/time-attendance-software)
- [Absence & Leave Management](https://www.employerpass.com/leave-management)
- [Performance Management](https://www.employerpass.com/performance-management)
- [Compensation Management](https://www.employerpass.com/compensation-management)
### Insurance & Benefits
- [Employee Benefits Administration](https://www.employerpass.com/benefits-administration)
- [Workers' Compensation Administration](https://www.employerpass.com/understanding-workers-compensation)
### Find An Expert
Give us some basic information about yourself and your business challenge, and we'll help you find a provider for your unique situation, industry, location, etc.
[](https://cta-redirect.hubspot.com/cta/redirect/4903907/8d3e1a8d-bb27-4400-982a-ba8899bf21e0)
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