What Are Compensation Metrics? Definition & Measures

Compensation Metrics – Definition

Compensation Metrics are the measure that helps you know the ratio of compensation and benefits spends against your revenue or profits.

Employee compensation and benefits are one of the biggest operating expenses for businesses. Compensation is the total of cash and non-cash payments made to an employee against their work.

Generally, employee compensation includes salaries, overtime pay, benefits, incentives, bonuses, etc. These metrics help us in preparation/estimation of the budget and recruitment planning.

Furthermore, it helps to define, design and amend your compensation strategies for the betterment of the company.

4 Useful Compensation Metrics

Four useful Compensation Metrics are:

• Base Salary Increase Rate
• Benefits Spend Rate
• Annual Benefit Spend Change
• Total Compensation Spend Rate.

Let us understand each of these in brief.

Employee Base Salary Increase Rate

Employee base Salary Increase rate is the percentage of increase in the basic salaries during a specific period of time. You can calculate it annually, half-yearly or quarterly.

Usually, this increase is always calculated annually. Only in some companies, it is measured quarterly or half-yearly.

To know more in detail and download a ready-to-use Base Salary Increase Rate Calculator in excel click here.

Benefits Spend Rate

Benefits Spend Rate is the percentage of total compensation that a company spends on employee benefits.

The benefits policy of a company provides peace of mind and satisfaction to the employees. It assures that they & their families in bad times.

During Serious illness or disability they feel secured and have additional protection. Employees present their employers with pride as the benefits available satisfies them.

It has increased in recent years. It has risen from about 20% to 30% of Total Compensation.

To know more about it in detail and download a ready-to-use Benefits Spend Rate Calculator in excel click here.

Annual Benefit Spend Change

Annual Benefit Spend Change is the amount and percentage change in Benefit spend between two specific periods. It is the annual comparison report.

You can compare the change between the amount spent on employee benefits in the current and the previous year. It is also helpful to accountants to project the budget for the upcoming years.

Click here for more information on this measure and also download a ready-to-use Annual Benefit Spend Change Report in excel.

Total Compensation Spend Rate

Total Compensation Spend Rate (TCS Rate) is the percentage of operating expenses a company spends on employee compensation. It includes salaries, overtime pay, benefits, incentives, bonuses, etc.

It provides insight into the human capital costs and evaluating the fixed and variable compensation.

Click here for more information on the Total Compensation Spend Rate and to download a ready-to-use Total Compensation Spend Rate Calculator in excel.

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