5 KPIs For Compensation and Benefits Policy

How to Create a Compensation & Benefits Policy? 5 KPIs to Measure

The employer-employee relationship isn’t just about salaries anymore.

Employees today are interested in what you have to offer them. Sure, their salary is important. But what else?

In HR terms, this ‘what else’ is known as compensation and benefits.

Compensation and benefits are part of your compensation and benefits strategy, which in turn falls under your broader HR strategy ?and HR budget.

Compensation refers to the money or salary you’ll give each of your employees. Meanwhile, benefits refer to the perks employees get when working with you.

In other words, compensation refers to how much the employee will receive in exchange for working at your company.

Benefits, on the other hand, are like privileges. They are additional elements that in some cases can outweigh their salary.

But how you will ensure that what you’re offering is ‘good enough’ or meets your employees' needs? The answer is by measuring and reviewing KPIs.

5 KPIs for compensation and benefits

We’ve clarified what compensation and benefits are. Now, let’s look at the key performance indicators (KPIs) for this important area of HR.

Measuring these KPIs and ensuring the effectiveness of your compensation and benefits scheme is the role of your HR team or executive.

Compensation and benefits KPI may also be referred to as employee compensation metrics.

Let’s look at 5 KPIs for compensation and benefits.

1)???Competitiveness

The competitiveness KPI measures how your compensation scheme stands against your competitors.

Are you offering higher salaries than they are? Lower salaries? Similar salary ranges?

If you’re offering lower salaries than the competition, you’ll need to see if you’re offering better benefits.

You’ll also need to look at your employee turnover rate .?Are employees leaving your company and going to your competitors because of the lower pay?

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2)???Workforce expenses

The workforce expense KPI for compensation and benefits refers to the average amount of money (percentage) you invest in your employees compared to your other business expenses.

This metric affects many related HR decisions such as salary increases, promotions, and benefits. It also affects your company’s expansion plans.

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3)???Benefits expenses

The benefits expense KPI measures the value of benefits your provide your employees with. It measures the cost of medical care, holidays, and other employee benefits compared to local inflation.

HR teams refer to this metric when choosing a healthcare provider, medical plans for employees, among other needs.

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The above KPIs and metrics can include sub-metrics. One of those is the Geographical differential.

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4)???Geographical differential metric?

This metric looks at employees’ salary based on where they are located. Every company has a salary structure with salary ranges for each role. However, where the employee is or will be located affects how much they are paid.

Large and capital city employees will often make bigger salaries than those living in rural areas or small non-essential cities.

The cost of living in the capital tends to be higher. However, requiring that an employee move to another city will entail adding the cost of accommodation to their benefits.

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5)???Compensation revenue metric

The compensation revenue factor looks at the amount of money your company spends compared to its revenue. This compensation metric helps companies see how much of their revenue (percentage) goes to employees.

This metric helps companies understand the value of their overhead expenses. It shows them how much they’re paying employees compared to how much they’re earning in total revenue.

How to design a compensation and benefits package

The following are the essential elements you’ll need to include in every compensation and benefits package you send out.

However, it’s important to remember that while the elements in a compensation and benefits package are the same in each, the ranges for each benefit and item will vary based on

• The role
• The industry
• Size of the company
• Where the employee is or will be located

In other words, a CEO’s compensation and benefits package will differ tremendously from a junior salesperson’s or marketing executive’s package.

Every compensation and benefits package should include:

• Salary:?This should include the net salary and gross salary for the employee
• Overtime pay:?Some companies don’t offer overtime pay. They need to clarify this.
• Bonuses and commissions:?This depends on the position. Commissions are usually associated with sales, partnerships, and some business development roles.
• Retirement scheme (if applicable)
• Social insurance plan
• Medical insurance plan
• Stock options (if applicable)
• Profit sharing (if applicable)
• Relocation expenses
• Education reimbursement (if applicable)
• School, meal, and/or house reimbursements (if applicable)

Find out how you can create a compensation and benefits strategy that's inclusive for women, check out the following blog article