AI and automation are enabling faster, fairer, and more sophisticated pay decisions.
By Debbie Bolla
Managing payroll is more complex than ever before. With constantly changing pay transparency laws and offices expanding around the globe, HR needs to ensure they are maintaining compliance and consistency in their practices. Today’s tech platforms are helping to ease this burden being felt by HR and comp teams.
“Technology is now central to modernizing compensation practices,” says Jack Jones, Senior Principal, Compensation and Total Rewards for Mercer. “Not an add-on, but the backbone that enables faster, fairer, and more strategic paid decisions. It automates work routine, enables more sophisticated analysis, supports transparent communication, and helps ensure consistency and compliance.”
There’s no shortage of options in the market, and Jones recommends a few key system categories for a well-rounded HR tech suite, including:
- compensation management platforms;
- HRIS and payroll;
- market data analysis;
- pay equity tools;
- talent management; and
- workforce planning and analytics platforms.
AI is also allowing organizations to easily build strategic, data-driven compensation programs. “With the right tools and expertise, compensation teams can create detailed market analysis in just a matter of seconds,” he explains. “AI models can also find outliers in pay, identify compression, and even surface where the markets are moving differently from the internal policies, which can help employers prioritize those adjustments for all three.”
Data and analytics are at the center of a hyper-personalized pay approach. “Mercer has been at the forefront of implementing data-driven compensation decision-making for our clients,” says Jones. “As an example, we provide compensation modules that account for performance, tenure position and range, market positioning, role criticality, flight risk, internal equity, pay compression, all simultaneously.”
Understanding and analyzing these elements can produce very specific pay increases whether it be an annual bump or an off-cycle adjustment. These often result in higher retention rates and increased motivation among the workforce since compensation is rooted in data and strategy.
Market benchmark data also plays a role in strategic decision-making around comp. It provides a big-picture scope of salary norms, pay incentive practices, and even unique benefit offerings, like car allowances or meal stipends. It can also reveal outliers and allow organizations to course-correct. For example, if one employee is being paid in the 25th percentile of the market and another employee’s pay level is at 90th, and performance and responsibility are equal, should they receive the same pay increase? Data helps answer these tough questions and provides transparency to employees.
Today’s technology is allowing employers and employees alike to have a better understanding of pay practices. Data and analytics are enabling organizations to provide their workforce with structured ranges, compensation guides, compensation statements/pay explainers, market benchmarking, and performance evaluation. Payroll will continue to be complex, but the right mix of technology will empower more transparent and fair practices.
