When it comes to getting the most out of your payroll system, you want to track as many metrics and key performance indicators (KPIs) as possible, so you can keep your eye on the success of your business and make adjustments along the way. But how do you know which ones are most important? This post breaks down seven different metrics and KPIs that every business owner should have in their payroll dashboard to track their business’s overall health, including employee growth, time spent on specific tasks and areas of payroll compliance, among others.
1) Net payroll
Net payroll is the total amount of money that your employees have earned for work done. It also takes into consideration any deductions, such as taxes, or employer contributions to retirement funds. If you are calculating net payroll by hand, you can use a calculator or spreadsheet program like Excel. To calculate net payroll manually, divide the employee’s gross wages by their number of hours worked. For example, if an employee earns $12 per hour and works 40 hours per week for 52 weeks (26 fortnights), then the calculation would be: ($12 x 40) / 26 = $1,920 per week before taxes.
Net payroll includes everything an employee has earned for work done; it doesn’t matter whether they’ve been paid yet or not.
2) Net pension expense
Net pension expense is an accounting term that refers to the total of all contributions (employee, employer, government) minus the total of all benefits paid. It is a measure of how much money a company owes its employees for their pensions. You might also see this as pension liability or pension obligation.
Pension obligations are projected into future years by actuaries, who use assumptions about rates of return on investments and expected salary increases over time. However, these assumptions can be wrong – if they are too high, a company could end up with too much pension obligation or not enough funds to cover them. If they are too low, then it has too little pension obligation and risks running out of money before employees retire.
3) Full-time equivalent (FTE) headcount
Your FTE headcount is a statistic that represents how many full-time employees you have on your payroll. Tracking this metric will help measure the number of hours your business is spending on labor, but it’s not the only thing you should be looking at. For example, if you have one employee working at 10 hours per week for $1,000 per month and another working at 20 hours per week for $1,000 per month, then they both contribute to your FTE headcount and cost the same amount. The best way to find out what your FTE costs are would be to divide their annual salary by 52 weeks or 12 months.
4) Total compensation per FTE headcount
To calculate total compensation per FTE headcount, divide the total payroll expense by the number of full-time employees (FTEs). The result is a dollar amount that equals the average compensation paid per employee. This metric is a useful way to compare compensation levels across different organizations, as well as over time. It also enables decision-makers to make an educated guess about how much money will be required for future hiring needs.
5) Total employee benefits cost per FTE headcount
This metric is the total annual cost of your employee benefits per full-time equivalent headcount. This includes:
o Employee benefits expense
o Short-term disability benefits
o Long-term disability benefits
o Paid time off
o Health insurance premiums paid by the employer, including dental and vision coverage
6) Contribution rate index (CRI) ratio
The contribution rate index (CRI) ratio is a metric for measuring the percentage of an organization’s payroll costs attributable to its unionized workforce. The higher the ratio, the more expensive the union workforce becomes relative to other types of workers. This metric can be calculated by dividing the total payroll cost attributable to union employees by the total payroll cost of all employees.
The CRI ratio can be used as a proxy for determining how competitive or noncompetitive salaries are when compared with those of unionized employees. It also provides insight into whether your organization is achieving its intended labor management goals, such as maintaining competitiveness in pay rates with other organizations or attracting qualified new employees.
7) Insured group health plan premium as a percent of total payroll
Insured group health plan premium as a percent of total payroll is the percentage of your payroll that goes towards paying for employee’s insurance coverage. The insured group health plan premium as a percent of total payroll should be less than 10% if you want to keep your business afloat.
Insured group health plan premiums are what employees pay for their share of the insurance coverage. As an employer, you will also have to pay for the other 90%. That leaves employers with only 10% or less of their total payroll that goes towards paying for employee’s insurance coverage. If this percentage is higher than 10%, then the company may not be able to support its employees adequately.
In this blog, we highlighted seven metrics you need to track for your payroll dashboard. We discussed how each metric impacts the performance of your organization, how you can measure it, and what questions you should ask yourself before incorporating it into your dashboard. As a best practice, we recommend that you set up a meeting with the HR department when adding new metrics to your payroll dashboard so they can advise on whether or not it is appropriate.