Incentive compensation blog

What tools are available to help companies manage incentive schemes?

Written by Hervé de Riberolles | October 01, 2018

Primeum takes a look at the five most commonly-used solutions for the management and oversight of incentive schemes in business.

“Good tools make good workers.” The wrong tools cost you time, money and sometimes even the motivation of your best teams. Below is a list of options available to businesses, with tools to administer incentive compensation within your company.

It’s up to you to combine productivity and efficiency by choosing the right tool for you. What are your selection criteria? You should think in terms of cost, but also in terms of ease of use, possibilities for adaptation to your scale, as well as the specific circumstances and realistic needs of your company.

 

Excel tables

It’s more than likely that you already have Excel installed on your computer - it’s the gold standard of basic solutions, as well as the least cumbersome and, in theory, the easiest to adopt. Small businesses naturally tend to favour this solution at first, but eventually find that Excel has its limits, and even its drawbacks. Indeed, this solution is neither the most complete nor the most effective. Excel has major difficulties in overcoming certain issues. As Fabien Lucron, Development Director at Primeum, explains:

“Although Excel is great for automating a wide range of everyday operations, it struggles to calibrate compensation scales. It seeks to simplify things by pressing us to create performance thresholds linked to bonus amounts, although in reality companies need to ensure continuous development in their bonuses in order to motivate their staff to produce the performance levels expected.”

 

Ready-to-use excel programs

To help make this task easier, a number of ready-to-use Excel macros are available on the internet, enabling firms to simulate compensation plans and calculate incentive for their staff.
All the baseline scenarios are designed so that these models enable you to simulate and calculate a variable salary using a linear model (% of fixed salary based on revenue and/or margins), or the unit value of fixed bonuses by level of target achievement (or level of achievement without a fixed target), or a variable salary based on qualitative criteria, etc. Each grid model for variables allows you to set personalised thresholds (floor and ceiling). These are not adapted to the issues specific to each company, but it’s true that this more targeted solution can save time when compared to starting with a blank Excel sheet.

 

 

Payroll management solutions

Payroll management software provide solutions designed for use by HR departments. They are naturally more cumbersome and expensive than Excel. As their name indicates, these systems are designed to handle issues pertaining to payroll as a whole, from the compilation of payslips to the activation of new rules. The choice of software and its editor is essential: a high-performance software for your payroll organisation should always be capable of adapting to your needs, integrating specific functionalities on a case-by-case basis.

Always ensure that the program takes into account criteria such as the characteristics of your business sector, collective bargaining agreements and the various employee categories in your company. Most software editors will have accounted for the need for a flexible and adaptable solution based on your HR objectives and issues.

Nevertheless, these types of HR tools do not meet the specific need to create and manage bonus schemes, nor are they designed to help you with the key challenge of sustaining staff awareness and understanding of these schemes. These tools are vital for general payroll management, but you won’t be able to use them to calculate a full range of bonus schemes for your staff.

 

Personalised variable pay tools

Specialist agencies offer personalised incentive compensation tools - robust software suites with the capability to structure your incentive plan, in order to respond effectively to your needs in terms of bonus calculation.

Some of them will be able to automate the whole calculation process.

 

Their measurement tools guarantee you the “Rolls Royce experience” in terms of incentive analytical processes, and this is one of the most powerful options for developing your motivational strategy via a variable pay plan. There’s no doubting the impressive quality levels delivered by these agencies, but it might be worth asking yourself: do I really need to drive a Rolls Royce? Do these solutions fit my needs, and my budget?