Compensation is the gross cost to the employer of all salaries and wages, the variable elements, performance related pay (bonuses, commissions, profit linked pay) attendance related pay (overtime, shift allowances, standby) and national insurance / social security.
Benefits includes all other reward components e.g. pensions, healthcare, cars, stock options, professional fees, childcare, lifestyle benefits, subsidised Products / services etc.
Revenue is the total monetary value generated from the sale of goods and services, together with any other income credited to the organisation via transfer price revenues, subsidy or grant.
• Remuneration/Revenue is a fundamental measure of workforce productivity. At a macro-business level, organisations objectives often require that revenues will rise faster than remuneration i.e. productivity is expected to improve. If you have a relatively low percentage of Remuneration/Revenue, your organisation probably has highly competitive productivity levels given your wage levels are comparable to the market. By contrast, if you are positioned in the upper quartile then (i) revenue generation may be found to be insufficient given the investment in people, or (ii) the remuneration package may be considered too generous given commercial revenues.
• A high Remuneration/Revenue ratio may be an indicator of high relative workforce numbers. Understand the effects of pay inflation on your organisation’s productivity positioning; very often headcount controls are swiftly wiped out by pay inflation for the remaining workforce, thereby having only a one-off positive effect on productivity profile.
• In response, HR practitioners should provide guidance in structuring remuneration packages to meet both regulatory requirements and the business challenges facing the organisation. They should also be quick to react to changing commercial conditions and adapt reward strategy to drive desired behaviours and commercial results. It is important then for organisations to monitor macro industry and geographic trends over time.
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