Workforcecosts
Workforce costs can be described as the sum of all costs associated with the workforce including pay and benefits.
Common measures
Total compensation: This measure comprises all direct and indirect compensation received during a specified time period.
Total workforce cost: This is a measure of the total cost of the workforce. It is a key indicator of the financial value the organisation places on managing, maintaining and developing its workforce (click here for more information on total workforce cost)
For example: Total compensation cost + benefits cost + other workforce costs = Total cost of the workforce
Guaranteed pay: This represents a fixed monetary (cash) reward paid by an employer to an employee. The most common form of guaranteed pay is base salary.
Variable pay: This is a non-fixed monetary (cash) reward paid by an employer to an employee that is contingent on discretion, performance, or results achieved. The most common forms of variable pay are bonuses and incentives.
Benefits: These are programmes an employer uses to supplement employees’ compensation, such as paid time off, medical insurance, company car.
For example, a company may measure the number of employees accessing these additional benefits.
Equity-based compensation: This describes stock or pseudo-stock programs an employer uses to provide actual or perceived ownership in the company. This ties an employee's compensation to the long-term success of the company. The most common examples are stock options.
For instance, a company might measure the number of employees taking out company stock
Employer costs: Taxes and insurances mandated by law and regulation.
Further research
The following research report from the Human Capital Management Institute, Linking human capital to business performance, offers a critique of common measures such as profit-per-full-time-employee and total-cost-of-workforce.
Find out more here: Linking Human Capital to Business Performance
Resources description
For more information on employee benefits including types of benefit, developing a strategy and organising flexible and voluntary benefits schemes visit the CIPD factsheets.
Flexible and Voluntary benefits
For practical guidance on implementing and managing benefits schemes download the CMI checklist.