CompTech: What It Is, Where It Came From, How It Works, And Why It Matters

March 7, 2022
min read
Scott Ginsberg

In the past two years, hundreds of millions of dollars of venture capital money and corporate investment have gone into compensation innovation.

And it’s catalyzed a movement.

We’ve continued to see significant financing directed towards exciting new comptech tools that address a variety of compensation related pain points, and being part of that world is a privilege.

In October of 2021, Pave Founder/CEO Matt Schulman turned a lot of heads with his post, The Birth of a New Industry: “CompTech”.  He said that a light had been turned on, and a new era of innovation had abruptly begun. Our assertion that we are no longer stuck in the compensation dark ages continues to hold true. 

But what exactly is comptech? 

You can start by reading Pave’s official definition on Urban Dictionary, with a short overview and a few lighthearted remarks about the death of spreadsheets:

Overview: How are we thinking about comptech?

Compensation technology (abbreviated comptech or CompTech) is the technology and innovation that aims to advance traditional human resources tools and methods in the planning, communicating and benchmarking of employee compensation.

Comptech is an emerging industry that uses real time data to reduce manual effort, human error and salary inequities in organizations. Compensation technology companies consist of both startups and established tech companies aiming to make salary, benefits, valuation, cap tables, stock options and other elements of total rewards more accessible to human resources teams and the general public.

Definition: What is comptech, exactly?

Comptech is a new human resources industry that applies technology to improve compensation activity. Comptech refers to the new applications, processes, products and business models in the human resources industry, composed of one or more software as a service platforms and provided as an end to end process via the internet.

Key Areas: Whom does comptech involve?

Compensation technology has been used to automate salary benchmarking, compensation planning and communicating, merit cycles, candidate offer letters, employee rewards letters and diversity, equity and inclusion management.

The services may originate from various independent service providers, including Human Resources Information Systems (HRIS) and capitalization management and valuation software. The interconnection is enabled through open APIs.

History: Where did comptech come from?

The need for CompTech was triggered by the COVID-19 pandemic. In early 2020, unemployment rates skyrocketed, remote work became the norm, and a surge in public focus on more equitable practices in the workplace around diversity, equity and inclusion. Covid tipped the world of compensation into a state of newfound pain and activity.

As jobs slowly started coming back, the economy entered a labor shortage dubbed The Great Resignation. Employee churn rate was twice as high as years before, and with hot economic conditions, wages were up. Employers were forced to be attuned to labor market wage fluctuations in real time.

With the growing calls for employers to be more transparent with pay equity statistics, a new candidate expectation for employers to be open around compensation, and new legislation around proactive wage details, CompTech was born.

Due to such economic, societal and cultural factors, hundreds of millions of dollars of venture capital money and corporate investment into compensation innovation have kickstarted the CompTech industry.

As of August of 2021, Pave, raised a $46 million Series B via Y Combinator, with participation from Andreessen Horowitz and Bessemer Venture Partners. In February of 2022, Pave was named a breakthrough company on YC's Top Companies.

Technology: What powers comptech?

Comptech, when compared to previous human resources systems that relied on manual entry and outdated market data, ensures the consistency across a company’s employee base, regardless of demographic. Comptech companies use a variety of technologies, including the benchmarking of real time market data.

Software platforms enable human resources to efficiently set bands for a role once, empowering hiring managers to operate without needing one off approvals for a job offer. The effectiveness of such data helps companies know what the market is paying for a given role, saving teams the trouble of either making an offer that will never be accepted, or overpaying for a role. 

Data: What information runs comptech?

Leading comptech tools allow human resources teams to slice, compare, and display data any way they need it so they can make key compensation decisions with confidence. This data helps companies create compensation philosophies, comp bands, and make competitive offers with confidence with data that is ahead of the market.

Compensation benchmarking data should be stored and exposed in aggregate slices, never individual data points. Industry leaders are SOC2 Type II compliant, and the data undergoes quarterly penetration testing, ensuring strict organizational and technical controls to protect compensation information.

All data utilized is fully separated from both the individual and from their employer to render it unidentifiable. Benchmarks can never be associated with an individual or company.

Recognition: How has comptech been portrayed publicly?

In January of 2022, The New York City Council passed a new law that requires employers to post salary ranges in job ads. This bill makes it an unlawful discriminatory practice to not include in job listings the minimum and maximum salary offered for any position located within New York City.

Other progressive states like Colorado and California are already leading the charge with similar legislation. As more and more institutions recognize the value of compensation transparency, the comptech industry is forecasted to grow substantially.

Outlook: What’s the future of comptech?

Compensation is seen as one of the industries most vulnerable to disruption by software because human resources have typically relied on annual compensation surveys.

Prior to the launch of leading comptech tools, most human resources professionals used this process that included capturing data manually, often housed in different systems that weren’t integrated. Such data would grow stale quickly, fail to integrate and often lead to bias or error in salary or equity calculations.

Ultimately, this is only the beginning for comptech.

Pave's mission to make compensation transparent, accurate and fair is just scratching the surface.

As more venture capital financing and corporate investment continue to funnel into compensation innovation, let Pave be the first to welcome you to the movement.

Learn more about Pave’s end-to-end compensation platform
Scott Ginsberg
Senior Content Marketing Manager
Author of 53 Books. World Record Holder of Wearing Nametags. Busker in Brooklyn. Dogs > Cats.

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