Compensation metrics are measurements made regarding employee pay programs, both for non-monetary and monetary pieces. Metrics are great for revealing problematic and successful areas of compensation.

With compensation metrics, organizations can better understand their pay distribution techniques and make better decisions. What gets measured can easily get managed and are great for making the necessary improvements.

In this article, we’ll dive deeper and learn more about the top compensation metrics every human resource (HR) professional should be tracking.

The reason you should track compensation metrics Compensation metrics should be tracked since they are one of your first levels to business success. It’s necessary to make sure you are being fair to all employees.

Employee compensation is more than just paying them a salary, but includes benefits like health insurance, retirement contributions, and paid days off. When an employee has a choice of which job they should take, they will always take the offers that have the best compensation levels.

11 Compensation Metrics you should track

Which compensation metrics are valuable to track? Let’s find out!

1. Pay range

A pay range compensates for the minimum, midpoint and maximum pay boundaries for certain roles. This is one of the top HR compensation plan metrics or analytics that determines the appropriate employee pay.

The formula to calculate employee pay range is the total of the minimum, midpoint and maximum salary. Pay range = Minimum, midpoint and maximum salary.

As you may know, the minimum salary is the lowest pay for specific roles. Depending on each company and how they operate, the average lower salary will be 20% less than a regular competitive salary (midpoint).

The competitive salary, or as we might call it a “midpoint pay range”, is an average pay between the maximum and the minimum. If the maximum pay is $800 and the minimum pay is $400, the average pay would be $600. Most companies that pay below an average salary will have higher turnover rates.

In order to find the competitive salary pay range, you can add the minimum and maximum salary together and divide it by two.

As for the maximum salary pay range, it’ll usually be 20% higher than the average salary. However, this depends on the organization and how it operates.

Additionally, you have salary differentials, which is an additional pay for skills or working conditions. The differential is usually 10%, but will differ in each organization. The differential adds to the base pay. The formula to finding your pay differential is multiplying the base pay by the differential.

2. Token grant compensation

Some organizations have switched to a form of compensating employees in tokens. Downloading a token grant administration platform for complying with rules is a great way to start out. Especially at the start, you might struggle a bit, but a platform can do most of the work for you.

Grand administration involves managing a set of schedules and realization of tokens so employees receive grants without facing high risks or any tax burdens. Most grant administration platforms can also integrate with a 3rd party payroll solution to help reduce all trouble that might be provided to the internal processes.

The platform can keep and update all required documentations and reporting that are required for complying with grant administration.

3. Total cost of workforce

This is the total amount of money you’re spending on your staff and expenses. While labor costs can be huge for most companies, many managers aren’t actually quite aware of it. We are talking about the Generally Accepted Accounting Principles (GAAP) that many companies don’t track.

You can’t ever manage something you can’t measure and whenever calculating this, you should include the pay and benefits alongside as well. There are some organizations that will add the operating costs as well.

4. Cost per hire

The cost per hire is closely associated with the average time it takes to hire someone. The average number of days is calculated by the day the job is created and the day it’s filled. As a general rule, it’s important to reduce the number of days it takes to fill a position.

It’s essential to reduce the average time to fill in a position and to ensure that the ongoing skill shortage is reduced and that the best talent needs to be captured as soon as possible. Some organizations might like to conduct lots of interviews before they fill in a position, but this isn’t always the best practice. After all, you don’t have lots of time to lose.

5. Time to productivity and performance

Is the average time it takes a new employee to reach an expected performance level. A new employee that starts might take up to 12 months to settle in on a new job. Until the employee can settle in, the employer might undergo issues because the organization is planning its financial costs, resources and outlying time that is higher than the profit the employee is generating for them.

The faster the employee can reach this breakeven point, the better it’ll be for you and your organization for performing at its highest level.

6. New hire turnover rates

New hire turnover rates are new employees who leave your company within three to twelve months. This HR metric is great for increasing the effectiveness of the onboard process and making sure that you take precautions during the hiring period.

Turnover rates are a common issue and they usually start from the onboarding process. Starting from this part, you’ll understand whether your hiring process is going smoothly or not. Turnover rates aren’t good because they can lead to higher hiring costs in the long term.

7. Absenteeism rate

Your absenteeism rate is how frequently employees will use sick days to leave. It can be done purposely or unintentionally. The number of sick days employees take off is a great reflection of their productivity levels, but also lots of clues to their commitment, happiness and health.

High absenteeism rates are an earlier indicator of turnover rates. Absenteeism rates can be calculated by counting the number of days someone missed at work divided by the number of permanent employees.

8. Goal achievements

Achieving goals is part of the process when you hire new talents. If your employees are working hard enough and bringing you closer to your goals and achievement rates, this is a good sign. Your HR software should have a goal setting and tracking part that you can use for setting your organizational goals.

It’s not good practice to avoid setting goals for your employees because you won’t be able to measure the success rate after and know whether they are helping the organization come closer to them or not.

9. Calculate internal pay equity

HR teams need to be concerned about how their internal team is doing and if they are treating everyone equally or not. Internal pay equity refers to the percentage of employees who are within a salary band compared to the outliers.

This allows organizations to see if there’s a gap with employees who aren’t receiving equal pay for all of the work they are doing. We are talking about if employees are doing an equal level of work and not more than required.

10. Planned compensation vs actual compensation

A decent wage needs to be paid to employees for ensuring that there’s employee growth and that you’re attracting top talent. Comparing your actual to planned compensation helps you further understand if you are under or over paying employees.

Planned compensation involves the intended compensation for employees within a given period of time. The actual compensation is the total pay for all employees within this time period. This is connected to internal pay equity, so you can use this formula for assessing that part.

11. The average annual pay raise

You can call it a promotion or pay raise and this is usually calculated per year. Many employees work at a company for years and won’t get a pay raise within this time frame. In fact, recent statistics show that 55% of employees claim that they are underpaid due to inflation and it’s putting too much psychological pressure on them.

Compensation metrics matter more than you think

As we said before, you can’t manage something if you don’t measure it. There are endless metrics you can use for your compensation plan, but we showed you the most important ones.

After gathering all the important information you need, you can now know if you are underpaying or overpaying your employees and if you’re treating everyone equally for the amount of work they are doing.

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Tony Ademi is a freelance SEO content and copywriter. For roughly four years, Tony has managed to write more than 500 SEO-optimized articles and most of them have ranked #1 on Google. When writing, Tony’s main focus is to carefully do research and make sure that his content is high-quality.