KPI of the Day – Human Resources (HRM): # Fringe benefits to basic salary ratio
Definition
Measures the total fringe benefits expense relative to the basic salary expense during a specific period of time.
Purpose
To provide an indication of the earning structure and the impact of salaries and fringe benefits on total earnings.
Recommendations
Fringe benefits are a form of payment for performance in work accomplished, such as accident and health plans, life insurances, etc. Based on the country’s legislation with regards to the taxes paid for fringe benefits and basic salaries, HR practices might be influenced due to cost savings.
Companies monitor their # Fringe benefits to basic salary ratio in order to keep their labor cost under control. The KPI also provides the reason for benchmarking against industry peers. It enables organizations to assess their spend on employee benefits while also providing an opportunity for employers to save on this expense.
Saving on # Fringe benefits to basic salary ratio is particularly viable in the case of two companies merging. In this case, evaluations of the merging companies can result in adjustments, and employees can be easily engaged in understanding the necessity of such reconciliations.
We will not offer any target threshold examples here, as these vary widely according to the amount of basic salary, the legislation, and the HR reward-based strategy. Benchmarking is suitable for this indicator is based on industry and geographical factors.
If you are interested in more Human Resources-related KPIs, smartKPIs.com subscriptions provide access to +500 KPI examples. Our dedicated Library contains relevant resources to improve your KPI practices, and if you want to further improve your knowledge, feel free to explore our latest publication – The Human Resources KPI Dictionary.
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Tags: Human Resources performance, KPI
