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New study demonstrates 235% ROI from Payscale compensation management solutions

With Payscale salary data and technology, companies can confidently keep up with current pay trends and effectively execute their compensation strategy.

Today, Payscale Inc., the leading provider of compensation data, software and services, revealed the results of a Total Economic Impact™ (TEI) study commissioned from Forrester Consulting on Payscale’s compensation management software and solutions. The study concludes that utilizing Payscale delivers 235% return on investment through a combination of quantifiable cost savings and efficiency gains over three years.

“The analysis by Forrester Consulting provides third-party validation that investment in our compensation management software and solutions will more than pay for itself,” said David Hwang, Chief Customer Officer of Payscale. “In the digital age, and especially with pay transparency on the rise, every organization in every industry should be making it their mission to get pay right. Organizations need to be able to move quickly to adapt to changing markets. Payscale’s blend of salary data, compensation software, and professional services help our customers remain up-to-date, agile, and confident in their compensation strategy.”

Forrester Consulting interviewed representatives from four Payscale customers and combined the results of their analysis to form a single composite organization. Forrester developed a financial model representative of the interviews and examined four fundamental elements benefits, costs, flexibility, and risk to assess total economic impact.

Overall, the insights collected from customer interviews together with financial analysis found benefits of $2.87 million over three years. This includes cost savings of $2.5 million from reduced turnover and $380,000 from reduced time spent managing and reporting on compensation data. The composite organization spent $856,000 over three years on costs that include salary data and market adjustments, as well as a subscription to Payscale compensation software, implementation, and managed services. The benefits and efficiency gains of $2.87 million minus the cost add up to a net present value (NPV) of $2.02 million and an ROI of 235%.

“I’ve made my feelings clear at this point, but I’m such a Payscale fan,” a senior compensation analyst in the healthcare industry told Forrester Consulting in the study. “It’s been such a massive improvement in my work life that it’s almost something that I’d want to screen for with any future employer I may have down the road. And if it’s something they don’t already have in place, I’d definitely push hard for it.”

Interviewed customers of Payscale also remarked on the following benefits:

  • Ability to quickly market-price any job at any point of time in the year
  • Reduced manual labor and risk from analyzing pay data using spreadsheets
  • Streamlined survey participation processes with templates and support from services
  • Tools to identify employee groups that should be brought closer to midpoints
  • Ability to dynamically and automatically update compensation structures and benchmarks
  • Customizable reporting to demonstrate the business case of updating pay practices

The estimated gains from the benefits above are quantified in the study with qualitative insights from interviewees providing details around how product functionality specifically benefited organizations.

The study also noted unquantified benefits such as fast ramp-up time, ease of use, decreased workloads, reduced stress, improved job satisfaction, amplified trust in human resources, and access to experts knowledgeable in compensation who provide fast responses and issue resolution.

“[Payscale’s] customer service provides solutions to your problems that are very customized to your company’s needs. And that’s an awesome thing,” an executive director of compensation in the business services industry told Forrester Consulting in an interview for the study. “With their help, the capabilities we’ve been able to build within the last three months have allowed this platform to more than pay for itself.”

The study did not cover all solutions offered by Payscale such as pay equity, pay transparency, or visual offer letters or quantify how leveraging Payscale compensation software frees up time to focus on more strategic initiatives. However, interviewees did discuss their desire to align pay practices to market expectations once more tactical compensation issues like pay compression and below-market salaries are addressed.

“We’ll definitely expand the offerings that we have with Payscale because it’s so easy to tack on other modules,” said the executive director of compensation in the business services industry. “We’re looking forward to tacking on more things like job descriptions or pay statements that could help give us deeper insights and provide more benefits to the company.”