While companies often think about effectively overseeing sales performance, they may neglect to minimize costs for their compensation management. Payroll is one of the biggest segments employers need to account for to manage their costs, however, accurate payroll is often something that is taken for granted among small and large businesses alike.
Payroll is crucial for any company because it encompasses compensation, which is a major piece of job satisfaction.
According to the Society for Human Resource Management, 60 percent of employees said pay was very important and 36 percent said it was important to determine job satisfaction. With employees putting a strong emphasis on pay, companies also need to focus on how they approach pay, including when calculating and distributing compensation. With a rise in employee demand for variable pay, such as bonuses and monetary rewards, companies need to keep track of all types of compensation through their payroll management system.
As companies strive to optimize their operations, they should look to improving their compensation management as a top priority to ensure employees are paid fairly and they are extended the right amount of incentives and benefits to keep job satisfaction high.
Here are hidden costs of payroll and compensation management:
1. Overpaying employees
With the huge costs associated with one employee’s salary, benefits and incentive compensation, employers need to be careful about ensuring accurate payouts, especially when it comes to their sales staff. Overpaying workers could not only result in monetary losses for employers, companies may not achieve the sales targets they set out. When employees are paid more than the value they bring to the company, this could leave fewer resources and incentives for employees who are hitting their marks and raking in money for the company.
2. Not tracking compliance requirements
While it seems simple to adhere to all the legal requirements associated with payroll, some companies may not be aware of changing regulations and other rules that could determine whether they are in the right or wrong of compensation management. Companies should make sure that their payroll solutions are ready to adjust to any regulation revisions and help them comply with these rules.
3. Spending time with manual processes
In the age of big data, it seems backwards to have to type every piece of information about employee compensation into a payroll system. Some companies are still living in the dark ages of inputting their payroll data by hand and in spreadsheets. While spreadsheets seem familiar, they are less effective in keeping track of compensation information, especially if these spreadsheets have to be changed by hand every time a new employee comes on board or an existing worker leaves.
4. Errors in compensation management
Although companies pride themselves on having keeping a tip-top staff and being equipped with the latest technologies, they may be dismayed to hear that their payroll systems could still experience errors. As described above, this can happen often when employers are still using manual processes to input their data into their payroll software systems. With errors, companies could make the crucial mistake of not paying their workers sufficiently, which could lower job satisfaction and result in increased turnover rates.
5. Choosing software that is not scalable
Imagine spending thousands of dollars on new payroll software and discovering that you will have to upgrade to an entirely different system in a few years because it cannot keep up with your company’s growth. Firms could find themselves wasting money if they do not initially select software that is built to scale. When companies have compensation management software solutions that are already made to scale along with their business, they can more efficiently manage their payroll throughout any expansion or other changes in the company.
