Glossary definition

What is a compensation management system?

A compensation management system is a technology tool that manages salaries, bonuses and benefits for an employer.

It uses defined and automated processes and central data storage to do this efficiently and consistently, so that compensation is fair, competitive, effective and properly administered.

Good compensation management maintains workforce loyalty and satisfaction – poor compensation management leads to employee frustration and can undermine productivity and lead to high staff turnover.

That’s why software systems that help employers plan, deploy, monitor and administrate compensation are highly valued in a competitive talent marketplace.

Compensation management systems help managers to make sure they are applying pay policy fairly across their workforce and to benchmark against similar employer programmes.

Leading organisations may offer a wide range of benefits and flexibility for employees to choose.

A compensation management system keeps track of who has chosen what and gives employees the right monthly pay and access to the appropriate benefits.

It can also handle secure record-keeping and information exchange with taxation authorities.