When does a 3% merit budget deliver 3% bottom line impact? NEVER!
2022-05-09
One of the few things that some organizations overlook is the complete bottom-line impact from their merit budget review. Salaries are always going up! The merit budget exemplifies this.
Let’s take, for example, a 3% merit budget, when asked what is the cost impact? Most would respond, 3% of salaries. However, salary is a baseline for other benefits, allowances, etc. Therefore, when salary is increased, the other reward elements that are a formula based upon salary will increase as well. We call this the Ripple cost impact.
This Ripple Cost impact is sometimes hard to calculate because you do not have the other elements digitized within a system. This really epitomizes the uFlexrReward tool. Since all reward elements (allowances, benefits, perks, pension schemes, mobility costs, etc.) are digitized within the system, so you can quickly determine the bottom-line impact on the organization of a 3% budget (which will be significantly greater than 3% on salaries depending upon on your total reward design).
Steve Brink
Subscribe to our Blog & Newsletter
