Reward and recognition
This category describes the extent of financial provisions made to employees, including cash pay and any additional benefits package, including pensions. The purpose of employee benefits is to increase the economic security of staff, improve engagement and drive retention. Discretionary benefits, such as free or subsidised meals and leisure time may also be included as part of employee reward and recognition. The term ‘total reward’ also encompasses non-pay benefits.
Comp ratio (CR): a measure of the relationship between the salary of an employee or a position, and the midpoint of the pay range for that employee or position (see here for more information).
Comp Ratio = Salary / salary range mid-point.
For example, CR = £25,000/£30,000 = 0.83 ; The salary is 83% of the mid-point for the range.
Salary range penetration (SRP): A measure of salary in relation to the whole pay range (see here for more information).
Salary Range Penetration = (salary – range minimum)/(Range maximum – Range minimum)
SRP = (£25,000 - £22,000) / (£35,000 – £22,000) = 0.23 ; The salary is at 23% of the range of potential salaries.
Average compensation per employee: a measure of the average compensation paid to all full-time equivalent employees.
Average compensation = compensation / headcount
Market index: a measure of the ratio of internal salaries compared to market rates for external benchmarked roles. This measure requires external benchmark data.
Market Index = (internal average pay – external benchmark pay) / External benchmark pay
MI = £40,000 - £36,000 / £36,000 = 0.11
Bonus pay percent: a measure of the percentage of annual bonus paid relative to annual base salaries.
Bonus Pay Percent = bonus pay / compensation *100%
Research finds that employees of organisations with a more holistic approach to reward management are 59% less likely to look for a job with another organisation.
This online article from Gallup argues for a more rounded approach to reward and recognition including the factors that drive the engagement of employees as well as the positive evaluations employees form of themselves.
Find out more: Retaining employees: how much does money matter?
Collecting and analysing the data from your organisation’s reward and recognition strategy can help you better understand your workforce costs, how and where your strategy is driving innovation and productivity, and potentially how your organisation is faring against its competitors.
For more information on developing a reward strategy and how strategic reward can support your business model and objectives, visit the CIPD factsheets:
The CIPD’s annual reward management survey looks closely at organisations across private, public and third sectors, to provide a benchmarking resource on the current and emerging practices in UK reward management.
Read the latest report findings: Reward management survey