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The compensation software market size is estimated to grow at a CAGR of 11.13% between 2023 and 2028. The market size is forecast to increase by USD 6.76 million The growth of the market depends on several factors, including adopting pricing strategies of vendors in compensation software, increase in demand for automated compensation management processes and increased adoption of SaaS-based compensation software. Compensation software automates, organizes, and simplifies complex compensation planning and enables managers to increase accuracy, improve budget allocations, and align compensation decisions with organizational guidelines. Enterprises are implementing compensation software to make better compensation decisions while reducing compensation cycle times with up-to-date, accurate, and auditable processes. The adoption of compensation software is increasing in small enterprises and startups because it shortens compensation cycles for the most complex compensation planning. The software employs automated and wizard-based workflows that eliminate time-intensive and ineffective manual processes. Compensation software eliminates the use of spreadsheets with an easy-to-use compensation planning tool. Compensation software offers a centralized, error-free, and auditable tool for HR and line managers, which helps to eliminate costly calculation errors.
The report offers extensive research analysis on the compensation software market with a categorization based on End-user, including large enterprises and SMEs. It further segments the market by Deployment, encompassing cloud-based and on-premises. Additionally, the report provides Geographical segmentation, covering APAC, Europe, North America, Middle East and Africa, and South America. Market size, historical data (2018-2022), and future projections are presented in terms of value (in USD billion) for all the mentioned segments.
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Adopting pricing strategies of vendors in compensation software is notably driving the market growth. To thrive in a competitive market environment, software vendors are adopting customer-centric pricing strategies that are enabled by advances in technology. A number of vendors in the compensation software market are focusing on providing value-based pricing models depending on the customer's needs and value perceptions. The pricing of the software is based on the differentiating and value-added features of the software solutions. While implementing the software, the customers focus on certain economic and market factors such as ROI, the ability to opt for free models, and the limited IT budgets.
Furthermore, because there are compounding effects when companies move from on-premises to SaaS versions of their apps, it is critical to confirm feature requirements. Therefore, vendors are providing SaaS, commercial open-source models, and term licensing to be in sync with the changing demands. The varied pricing structures of the compensation software will increase its adoption among end-users, which in turn to drive the global compensation software market during the forecast period.
The rise of multi-country and centralized outsourcing models is an emerging trend shaping the market growth. Organizations are looking for outsourcing partners that have exposure to multiple countries and can handle all the recruitment functions using sophisticated methods such as benchmarking, best practices, and process improvement. Globalization has toughened the competitive environment for outsourcing providers. India and China are considered to be the main countries receiving outsourcing projects. The rapid adoption of payroll outsourcing strategies is expected among multinational companies, which can boost the growth of the compensation software market.
In addition, Multi-Country Recruitment Process Outsourcing (MCRPO) is the latest trend and the fastest-growing segment among organizations. It involves the outsourcing of some or all payroll sub-processes in two or more countries. Thus, the increase in adoption of MCRPO is estimated to foster the growth of the global compensation software market during the forecast period.
Threat from open-source compensation software is a significant challenge hindering the market growth. Open-source compensation software is posing stiff competition to on-premises and cloud-based compensation software. As it can be downloaded and run on all platforms, it is becoming increasingly popular in developing economies such as India and China. Enterprises in these developing economies are giving prominence to the adoption of open-source compensation software mainly because of inadequate capital to invest in the expensive on-premises and cloud-based compensation software. Thus, open-source compensation software tends to be a very economical solution for enterprises with limited resources and expertise availabilities. The increasing adoption of open-source compensation software is reducing the overall revenue generated in the global compensation software market.
For instance, many companies such as Paycor Inc., leapsome, and others are providing free compensation management software, which can be challenging for key vendors as they provide higher costs for the compensation software, due to which can hamper the growth of the global compensation software market during the forecast period.
The market share growth by the large enterprises segment will be significant during the forecast period. The large enterprise segment holds the majority of the market share in 2023. Enterprise compensation software is used by large businesses to manage their financial, marketing, sales, human resources, inventory functions, and more.
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The large enterprises segment was the largest and was valued at USD 4.51 billion in 2018. Generally, in large enterprises, compensation software helps HRs to design and manage plans such as budget creation and award allocations. These are solutions that help increase communication between large enterprises and employees, which can use compensation software to reward employees and achieve transparency. These can also provide a larger insight for managers with necessary details that could make decisions based on employee performance and development. In addition, for any business to be successful, compensation planning is essential, which helps improve strategic pay scale decisions and also increases workforce engagement, which can enhance productivity. Moreover, due to all these factors, the large enterprises segment has been witnessing positive growth, which in turn will boost the growth of the global compensation software market during the forecast period.
Cloud-based compensation software is scalable and enables the management of IT resources in a complex IT ecosystem. This deployment model processes information centrally and streamlines the workflow of the enterprises. Cloud applications are more accessible and easier to use because the end-users require just a web browser and an Internet connection. Major factors driving the growth of the cloud-based segment are enhanced security features, interactive dashboards, ease of flexibility, and better scalability, which are encouraging enterprises across the globe to choose cloud-based compensation software. Moreover, cloud-based deployment offers higher agility than the on-premises deployment type. Cloud-based compensation software is more popular with small businesses because of its cost-effectiveness. Therefore, the demand for cloud-based compensation software will grow positively in the global compensation software market during the forecast period.
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North America is estimated to contribute 33% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. North America is expected to dominate the market with a major market share during the forecast period. Growth in job opportunities and an increase in the number of job seekers due to globalization, wider penetration of social media in recruitment processes, and an increased need for cost optimization are the major factors that will drive the compensation software market in the region. Factors such as improved penetration of social media and high demand for cost-efficient HR solutions are driving the market in North America. Organizations are adopting compensation software to manage their payroll and help them drive innovation, growth, and profit at all levels of their businesses.
In addition, this rise in the employment rate in North America, particularly the US, is driving the use of compensation software in the region. With the advent of digital technologies, HR functions have transformed to execute HR processes quickly without any interruptions. Payroll management through mobile applications is increasing in the US staffing systems. Payroll management solutions are implemented to enhance the performance of organizations.
The COVID-19 pandemic had a mixed impact on the growth of the market in 2020. It led to the imposition of strict lockdowns and a slowdown in sales in most businesses in North America. However, large-scale vaccination drives in 2021 led to an increase in the positive growth of the compensation software market. The developments in the compensation software market are expected to provide high growth opportunities for the vendors in the region, which in turn will boost the growth of the regional compensation market during the forecast period.
The Compensation Software Market report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Compensation Software Market Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Automatic Data Processing Inc. - The company offers compensation software that simplifies merit and bonus event cycles as well as allocate compensation with a clear line of sight to total budget, recommended ranges and employee performance.
beqom SA - The company offers compensation software that focuses exclusively on managing compensation for enterprises who demand the most from their compensation strategy.
BullseyeEngagement LLC - The company offers compensation software that allows one to remain competitive and retain the top performers while staying aligned with organizational budget structures.
The research report also includes detailed analyses of the competitive landscape of the market and information about 20 market companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The compensation software market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2018-2028.
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Compensation Software Market Scope |
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Report Coverage |
Details |
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Page number |
165 |
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Base year |
2023 |
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Historic period |
2018-2022 |
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Forecast period |
2024-2028 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 11.13% |
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Market Growth 2024-2028 |
USD 6.76 billion |
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Market structure |
Fragmented |
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YoY growth 2023-2024(%) |
10.28 |
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Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
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Performing market contribution |
North America at 33% |
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Key countries |
US, India, Japan, Germany, and UK |
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Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
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Key companies profiled |
Automatic Data Processing Inc., beqom SA, BullseyeEngagement LLC, Cegid SA, CompLogix, Cornerstone OnDemand Inc., CWS Software, Decusoft Inc., Execupay Inc., Greytip Software Pvt. Ltd., HRSoft, JSM Technologies Pvt. Ltd., Learning Technologies Group Inc., Nitso Technologies Pvt. Ltd., Payscale Inc., sumHR Software Pvt. Ltd., Torn Marketing Pty Ltd., UKG Inc., Workday Inc., and Paycom Software Inc. |
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Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for the forecast period. |
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Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by End-user
7 Market Segmentation by Deployment
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
Research Framework
Technavio presents a detailed picture of the market by way of study, synthesis, and summation of data from multiple sources. The analysts have presented the various facets of the market with a particular focus on identifying the key industry influencers. The data thus presented is comprehensive, reliable, and the result of extensive research, both primary and secondary.
INFORMATION SOURCES
Primary sources
Secondary sources
DATA ANALYSIS
Data Synthesis
Data Validation
REPORT WRITING
Qualitative
Quantitative
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