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5 Reasons to Invest in Remuneration Software

Salaries are a fundamental element of business. In fact, they’re contractual.

But it’s about more than just money. Wages form a critical part of the employer-employee relationship. Getting it right, therefore, is key to retaining and engaging the best employees.

In the last few years, ensuring fair and adequate compensation has become much harder – particularly for small and medium-sized businesses. A combination of Covid, inflation and rising labour costs means that budgets are smaller and wallets are tighter. This makes life difficult for proactive employers looking to attract and retain talented staff, while still making the company books add up.

Whatever the unique circumstances of your business, remuneration software can make a huge difference. In this blog, we consider the main benefits for HR teams and businesses. But first, it’s helpful to recap why this is such a challenge in the first place.

The risks and challenges of remuneration

Effective remuneration policies are a vital part of making sure your business is profitable and successful. But for many reasons, this can be much easier said than done:

1. Wages are inevitable and highly emotive

Paying your staff fairly and accurately is a foundational part of the employer-employee contract. Because of this, it’s highly emotive and scrutinised.

Research suggests that as few as 32% of UK employees believe they’re being paid fairly. This makes life difficult for employers trying to both retain staff and keep the company profitable.

2. Remuneration is one of your biggest operating costs

Wages are often the single largest cost to your business, meaning there’s no room for error. But too often, reviewing your REM strategy is a complicated and manual process, involving error-prone spreadsheets and multiple stakeholders.

Here, a small mistake can have huge consequences for the overall revenue of the business. Nonetheless, human error is common in these fiddly, spreadsheet-based processes.

3. Wage inflation is a constant

Over the past few years, there has been a much higher-than-average rise in UK labour rates. In fact, wage inflation hit as much as 5.4% in early 2024.

Though the situation has been worse in recent years, it’s nothing new. Employees expect their salaries to rise at least in line with inflation. The top performers also expect significant salary increases in reward for their hard work. Managing these ever-changing rates while maintaining profitability is a key challenge for every business.

4. Wage costs impact your bottom line

Doing more with less is key to business success – especially for small and medium-sized businesses that typically have tighter budgets. But in the current economic conditions, it’s never been more important to make sure that budgets can stretch as far as possible. This is particularly true for smaller organisations with fewer resources.

Navigating wage inflation with a tight budget isn’t possible without a reliable payment process in place. It’s important to ensure the best possible use of the resources you have to mitigate the effects of a more challenging economic landscape.

5. Compliance with gender reporting obligations

In the UK, there is increasing consumer and legal pressure on businesses to demonstrate that they pay employees fairly, regardless of their gender or race. As part of this, businesses with more than 250 employees are legally obligated to publish gender pay gap data. Some businesses may also choose to go further and publish more information.

It’s difficult to do this effectively without a bird’s eye view of who’s paid what across the organisation. This can be a key challenge for businesses looking to demonstrate transparency and fulfil their legal obligations.

6. Competition for talent is fierce

Tight talent markets pose bigger challenges when it comes to recruiting and retaining staff. Generally, a reduced supply of skilled talent will create higher wages. This is a particular challenge for employers at a time of already high inflation.

In this context, organisations often find themselves entering a bidding war in order to attract and retain the best talent available. This can significantly drive up labour costs, strain budgets and affect overall profitability, if not managed carefully.

Therefore, it’s important to get a clear understanding of what funds are available and how they’re being used. This will help you optimise your budgets, ensuring the best possible balance of employee salaries and business profitability.

5 ways remuneration software can make life easier

Remuneration is clearly one of the most challenging aspects of HR – but it doesn’t have to be. With the right technology, you can create a smooth, reliable and scalable process that delivers for your business and employees. Here are five steps to help you achieve just that:

1. Rem software helps to assess and prioritise benefits

Employers who want to attract and retain talented staff need to work hard on improving their employee experience. Offering above-market salaries is one way to do this – though this can be difficult to justify in a tough economic climate. However, it’s not the only solution.

Instead, you can improve the overall employee experience through bonuses, benefits, employee assistance packages, learning and development programmes and much more. There are many options available here – and the best place to start is to understand what’s valuable to your specific workforce.

Either way, remuneration software can help, by giving you a clear understanding of your budgets and how they’re distributed. From there, you can start to make strategic business decisions about where to reassign those funds so they have the maximum impact.

2. Create a more robust payment framework

When a business’ financial performance is low, it may not be viable to reward employees financially, but this In challenging economic times, you might not be able to hand out the pay rises and promotions that every employee would like to see. In this situation, there are often difficult choices to make. Should you take a blanket approach to pay rises for the sake of fairness? Or do you reward the highest-performing employees in the hope of retaining the best staff? And how do you decide which employees are high-performing?

By far the best way to make informed, consistent and transparent pay decisions is to develop a pay framework. This should give you a bird’s eye view over how much individuals are paid and how that relates to both their colleagues in the business and wider market rates.

Remuneration software makes it much easier to develop this framework, by creating a centralised database of employee salaries and job titles.

It’s not just large organisations that should consider such a framework. Medium-sized companies may need to make adjustments including salary freezes, setting revised performance targets and recalibrating short and long-term incentives. A framework can make this process easier for HR teams, while creating an objective and fair approach to pay discussions across the business.

3. Achieve compliance without the hassle

Remuneration software can also make compliance and reporting much easier. The best products are built with local compliance regulations in mind, which means they can help you with compulsory reporting obligations, such as those around gender pay.

Pre-built templates also allow you to easily collect and populate the right information into your reports. At the same time, rules-based automations can give you the tools to design your own bespoke reporting processes. This lets you manage both compulsory reporting and design your own bespoke reports for whatever other pay-related data you want to analyse or publish.

4. Demonstrate your appreciation for employees

Salary planning is one of the most efficient and effective ways to communicate your organisation’s values, priorities and goals. It’s a fundamental part of your employee value proposition (EVP) – the idea that employees who work hard and invest in the company will ultimately get something out of it. As such, there is a huge risk of damaging your employer brand if you aren’t transparent or true to what your organisation stands for.

Whether it’s a pay rise, promotion or qualifying for a new benefit, there are plenty of ways to show your appreciation. But before you can do that, you need to have a clear understanding of who is paid what, how much budget you have available and how that compares to an individual employee’s performance.

Remuneration software gives you the tools you need to quantify and forecast salaries at the company-wide level. From there, you can make effective decisions to ensure employees are looked after and that executives understand the ROI that these decisions can create.

5. Recalibrate your performance targets

Since COVID-19 hit, Remuneration Committees – or simply those making decisions on remuneration and The economic volatility of recent years has forced many organisations to re-assess their performance targets. Some may be adjusting the benefits and rewards they offer to suit a less rosy financial backdrop. But others may be looking to create targets and incentives that are better suited to a more volatile market. Some of these options might include:

Postponing or changing performance targets.
Switching to a shorter budget cycle.
Widening target performance and payout ranges.
Raising or lowering performance thresholds.
Concentrating incentives on the highest performers.

All of these decisions will have pros and cons on your employees’ engagement and, crucially, the profitability of the wider business. But before you decide what’s best for you, it’s important to understand what these financial implications are, so you can model the impact on your organisation and proposed ROI.

With the right remuneration software, you’ll have all the information and data you need to make effective decisions that work for both employees and the wider business.

Conclusion

When it comes to salaries, business leaders are often stuck between a rock and a hard place. You need to create a sustainable payment model that’s both financially viable and also reflective of the hard work and loyalty demonstrated by employees. If you can strike that balance, you’ll be much better placed to increase engagement, satisfaction and retention in your workforce – despite the challenges we face.

Effective salary planning is much easier with the right remuneration software. But in the UK, most software is designed for payroll, not remuneration. Valuable though that might be, it’s not really designed to provide the bird’s eye view you need to make strategic and effective decisions around pay.

Instead, ELMO Remuneration focuses on salaries at the company-wide level. This includes features like:

Flexible organisational hierarchy and a matrix-based reporting structure.