Saratoga Metric of the Month Remuneration ÷ Revenue Productivity Compensation + Benefits

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Saratoga Metric of the Month
The metric of the month is: Remuneration ÷ Revenue
Metric Group: Productivity
Remuneration / Revenue =
Compensation + Benefits
Revenue
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.
Interpretation:
• 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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exchange your views and tell us how you are using HR measurements to drive
workforce success in your organisation.
If you want to share your experiences or have any feedback on how we can
make this programme better, please write to:
Pamela McGill – Director – PwC People & Change
at: [email protected]
Mobile: 0909 668 290
Or
Vu Thi Le Lan – Associate Director – PwC People & Change
at: [email protected]
Mobile: 0966 633 816