Compensation management plays a large role in HR because it can impact employee retention, the hiring process, company performance, and team
engagement. Compensation managers are an important asset to the company’s success. If salary, bonuses, and benefits aren’t managed properly,
employees might find much better comp packages elsewhere, performance and job satisfaction could decline, and several other factors could
negatively impact the business.
Compensation management programs are designed to keep salaries and benefits competitive to help both employers and employees. A
comprehensive strategy helps the hiring managers make attractive offers to new talent based on data and current market trends. A compensation
management plan also comes into play when giving raises or bonuses to top performers.
The objective is to make informed compensation decisions based on salary market data, industry, company size, job role, and location. Although there
is value in compensation data analysis, it’s important to make compensation decisions according to the employee’s performance, qualifications, and
potential. Offering the appropriate compensation (ie a package that is comparable to other companies in your field and location) can help lower
turnover rates as employees will have less incentive to leave based on salary alone.
Another main benefit of compensation management is ensuring compensation equity. Determine if there is a gender wage gap at your company, or a
wage gap based on other characteristics, such as race or ethnicity. Oftentimes data will reveal biases or discrimination that HR leaders or businesses
owners are either ignoring or unaware of.
Finally, it can help save your company money by highlighting those you may be overpaying in comparison to market rate.