A Publication of WTVP

Now that the labor market is settling down to some degree, it is a good time for all organizations to take a look at what each job position costs them, not just the starting rate but the total cost to the organization.

It is amazing how many entities do not take credit for all the money they spend for maintaining an employee. For example, if you have an employee at $10 an hour and add 39 percent (or $3.90 per hour) for benefits, the annual cost is now $20,800 base plus $8,112 for benefits, totaling $28,912 per year, plus incentives.

What most employers do not add with this is the annual cash outlays for training, recognition and reinforcers that help retain employees, as well as the cost of developing a physical and emotional environment that ensures employees enjoy coming to work.

One of the main reasons a few executives are now developing this concept of total compensation is to reduce turnover by making sure they can attract and keep competent employees. Turnover is expensive for any employer. The greatest part of this expense is lost productivity and quality, with a lot of overtime and morale problems stemming from failure to meet customer demands thrown in. If you don’t know your total cost, you can’t take credit for it in your initial job offer package. Your job offer may be less attractive than a competitor’s. Does all that make sense?

If so, have your human resource people do a concept of total compensation for each job in your organization. As a side benefit, you should be able to manage your people-cost better.

HR Practices

Hacket Benchmarking and Research conducted a study of best practices with HR departments at more than 1,400 companies ranging in size from $200 million in annual revenues to nearly $147 billion.

Here is a summary of its findings: