How to Calculate Salary Hike Using People Analytics

by Marianne Chrisos - December 14, 2018
Marianne Chrisos

Marianne Chrisos | Born in Salem, Massachusetts, growing up outside of Chicago, Illinois, and currently living near Dallas, Texas, Marianne is a content writer at a company near Dallas and contributing writer around the internet. She earned her master's degree in Writing and Publishing from DePaul University in Chicago and has worked in publishing, advertising, di...

How to Calculate Salary Hike Using People Analytics

People analytics tools give your HR teams more insight into your human capital, the people you employ to support and run your business. With this insight, businesses who are looking to structure their raises on the concept of merit or “pay to perform” have better tools to effectively do this. Big data helps businesses answer questions like “How much is this employee contributing” and “what effect would the loss of this employee have on our business,” allowing for companies to make more knowledgeable decisions about how much that employee should earn.

With people analytics data,  HR teams and executive leadership have the ability to better track both the average pay raise across positions as well as a better understanding of an employee’s impact on the business, which enables businesses to find salary increase percentages that make sense and help to drive productivity and reduce employee turnover.

Visier notes that “Workforce analytics technology that yields granular insights from multiple systems compensation teams…the capacity to determine the optimal amount for increases based on hard data.”

How can people analytics help you calculate salary adjustments?

Here’s how to use that hard data to calculate salary hikes, as well as the benefits of using data to create a better compensation structure for your business.

1. Better performance evaluations

Big data helps businesses objectively evaluate employee performance. If a set of performance indicators is entered associated with that employee, it’s easy to see if those goals are being met and if performance is up to the standard being set. This drives productivity because an employee knows that his raise is tied to KPIs that can’t be faked and can be accurately measured. It also helps gives more clarity and structure around goals, often resulting in greater employee satisfaction and better overall business performance.

2. Less compensation confusion

CakeHR reports that even seasoned HR professionals and executives might struggle with finding the correct compensation to offer a new employee or when and how to calculate salary hikes on existing staff.

They note, “Big data helps you to understand when the right time to increase financial compensation is or if it is necessary to cut down costs and reduce the salaries. If you want to reward employees but not everyone in the same proportion, you can easily get confused and overpay them. Data analysts calculated on many occasions that employees would gladly accept much lower salary increases but HR units didn’t know that. With big data, they do know it now.”

People analytics gives HR the tools they need to understand the numbers.

3. Fewer salary discrepancies

Big data in HR helps to remove some of the bias present in many companies. It can help businesses gain access to the average pay raise that people may earn in similar positions or industries. As a tool, it helps businesses to better understand what is fair and what is expected in terms of pay increases, which can lead to better productivity and better employee retention. It can also help employers ensure that they’re creating fair wages for all of their employees, regardless of age, race, gender, or other factors that have been shown to skew salary numbers.

While people analytics might not be a perfect system, it is a huge advancement for HRM teams looking for deeper data to understand employees’ performance and impact on the organization. It can also be an asset to employees looking to create more competitive compensation structures that allow them to attract and retain the best employees and reward their top performers. Using people analytics to help calculate salary hikes or merit increases is a great way to ensure that earnings calculations fair, accurate, and unbiased.

Marianne Chrisos

Marianne Chrisos | Born in Salem, Massachusetts, growing up outside of Chicago, Illinois, and currently living near Dallas, Texas, Marianne is a content writer at a c...

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