If you work in compensation planning, you may think, how much damage can one spreadsheet do?

In 2012, JP Morgan Chase lost $6 billion–that’s billion with a B–in the “London Whale Disaster. It had a complex model called the Synthetic Credit Portfolio Value at Risk (VaR) Model that was manually updated in Excel. Someone made an error, and that error was repeated, ultimately resulting in huge losses.

In 2020, a UK contact tracing program left off 15,841 positive Covid cases. Why? Because no one realized Excel has a limited number of rows and additional cases didn’t get added on.

In 2024, officials in Japan's Aomori Prefecture discovered lost tax revenue of 790 million yen (approximately $5.4 million), which they had to recalculate and contact thousands of taxpayers about. This was caused by someone making an Excel reference error.

The problem with spreadsheets

Excel isn’t evil. It’s just not built for critical, high-stakes processes, including compensation planning. While these examples highlight large-scale disasters, similar errors can occur in everyday business processes. We all know that Excel (and its arch enemy, Google Sheets) are great at what they do. That’s why we use them. But we also know that human error can slip in way too easily. If we have important data and calculations, we know they should be somewhere more secure than a spreadsheet just one copy-and-paste or sorting error from disaster.

And yet, a survey done by Aeqium found that only 10 percent of people do their compensation work in dedicated compensation planning. Shockingly, 29 percent of companies do their planning in manually created spreadsheets.

Yes, those same spreadsheets that resulted in the above disasters. And keep in mind, most disasters don’t hit the internet. Companies don’t admit it and certainly don’t publicize it. These errors were all large enough that they couldn’t keep the errors quiet. But your errors can be devastating to your company. 

Manual compensation planning challenges

Nothing is more important to your employees than their paychecks. Sure, surveys say people want “meaningful work” and “flexible hours.” Cute. But what they really want? An accurate and fair paycheck. 

People want to be paid on time, accurately, and at the market rate. (They’d love to be paid more, but they’ll settle for the market rate.) You can manually do a basic pay bump for everyone. But manual calculations can leave important factors out when you get into more complex models that take multiple data points into consideration.

Relying on spreadsheets exacerbates this type of error-prone compensation process. Where do you get your market rate data? How do you put it in? How do you ensure the right information goes into the right spreadsheet and is applied to the right job description? Every one of those steps introduces room for error.

The benefit of dedicated compensation software

Using dedicated compensation software also increases your access to the data you need. In fact, Aeqium found that 27 percent of companies that use compensation planning software experience no obstacles in getting their up-to-date data, compared to only 8 percent that rely on HRIS compensation modules or spreadsheets.

Unfair compensation practices leave you vulnerable to legal challenges. Mistakes cost you money, sure, but they can also cost you lawsuits and your reputation. You may not mean to discriminate illegally, but putting in the wrong formula or linking to the wrong job description can introduce errors that violate the law. For example, paying your new hires (who tend to be younger) more than your long-term employees (who tend to be older) can result in an age discrimination lawsuit.

Add this to the data integrity issues that can occur when compensation data is entered into spreadsheets, and the risks of not using specially designed compensation software are magnified. 

Don’t risk becoming a headline.