Question

In a short paragraph, discuss how an HR team might use metrics to justify increased compensation spending as a less-costly strategy. Please be specific.

Answer 1

The metrics used by the HR department to evaluate strategies include absence rate, cost per hire, training cost per employee, turnover rate, time-to hire and return on investment for the employees. While justifying an increased compensation spending as a less costly strategy, the HR team may show the following advantages based on these metrics. An increased compensation will help to ensure employee satisfaction and retain them in the organization. Thus the employee turnover rate can be reduced and the organization can reduce the amount spent on new hires which may include the cost per hire and the training cost for the new employees. The loss associated with time to hire would be insignificant which helps to increase the productivity and the ROI. The employees would not take more leaves than permitted as the associated loss would be high based on the compensation. Hence absence rate also reduces which again improves productivity. If the organization chooses not to increase the salary, more employees would leave the organization and the organization would have to spend more on new hires which would be highly expensive. Based on these points, the organization can benefit more by increasing the compensation spending than providing the same salary which makes it a less costly strategy.