The last component of an effective HRIS is a Compensation system. A sophisticated compensation system will save you hours of number crunching using excel spreadsheets. Many of these systems are sold as a component of Performance Management systems, but there are a few stand alone ones as well. It is always best to integrate where possible because you save yourself the time and effort involved in paying someone to write the integration software for you and the headaches that come with integrating two systems that were not designed to work together.
The capabilities you want to look for in your Compensation Systems are:
Ensure that your performance management system and your compensation system are fully integrated so that all the performance scores from the manager’s appraisal, employees’ self-appraisals and any 360 reviews you have, flow over to your compensation system. This will make is significantly easier for your managers to be able to rank employees and doll out the appropriate performance based merit increases.
You want to ensure that your system has the ability to handle pro-rations, preferably down to the day, so that employees who start on September 1st are not eligible to receive the same increase as employees who started January 1st. If you have implemented an annual bonus program, ensure that the pro-ration will apply here as well. Also ask if it will handle lump sum increases if someone is at the range max.
One of the most frustrating aspects of a poorly designed compensation system is when it does not allow for edit capability all the way up the line. If the spreadsheet gets to your VP’s and they have to send it all the way back to the supervisors to make changes, you will lengthen your process considerably. You should be able to pick and choose who you want to give edit capability to for each spreadsheet.
Invariably someone will pick an inconvenient time to terminate and you will be left with a situation where you need to assign another person to actually complete the merit increases for their group. Your system should allow you to select a co-planner or, even better, to switch managers once the process has already launched.
Your system should come equipped with an easy to use and easy to understand reporting functionality. Nothing is as frustrating as having a new system and then having to dump everything in excel in order to actually manipulate the data. Spend some time up front fully understand the reporting capability and figuring out whether it will truly provide you with the info you need to report on.
Multiple types of Compensation
Your system should handle base salary increases, short term incentives and long term incentives like Equity awards or RSU’s. A system that cannot adequately handle long term equity incentives will give you a lopsided view of your employees’ compensation and how that compares to market.
As with the other components of the HRIS that we have talked about, putting twice as much time in up front as you expected will yield the best results in the end.