Compensation is the single largest driver to overall labor cost in any organization, followed by general health and welfare benefits (as well as retirement programs). Managing the fully loaded labor cost is an on-going challenge due to the rising cost of wages and benefits while trying to maintain competitive plans for all employees. This challenge has intensified in recent years as organizations struggle with maintaining business competitiveness.
Compensation programs, excluding executive programs, are typically composed largely of fixed pay components with some varying amounts of variable pay. Such programs, without the correct balance, place organizations at a disadvantage when faced with the need to slow down labor cost growth. Consequently many organizations are forced to freeze pay and in some cases reduce pay, which not only creates serious employee concerns, but also creates financial difficulties for the employees.
Creating the right balance between fixed and variable pay programs that provides an organization with the flexibility to deal with the rapidly changing environment is critical to maintaining on-going competitiveness and a positive work environment.
The ability to restructure existing compensation programs to increase the necessary management flexibility requires developing a thoughtful strategy backed up by effective communication.
General health and welfare benefits, excluding health care, are typically not significant cost line items, yet they can still be effectively managed to help reduce cost or minimize growth. The managing of these costs typically involve evaluating plan design and provider contracts, which should be an ongoing process. However, equally important for some of these benefits is to develop a clear understanding of the actual drivers to the utilization of these benefits. Understanding these drivers, which often goes undetected, can help to substantially manage these benefit programs.
How DPS can help you:
DPS has developed significant experience in managing overall compensation and benefit labor cost. Proven results in the actual reduction of such costs have been realized, thus improving business competitiveness while maintaining a positive work environment. As the need to effectively manage labor costs continues to escalate, DPS can help your organization evaluate your compensation and benefit programs and help develop and implement changes to improve overall competitiveness and achieve employee support.