The benefit wage formula is the ratio of benefit to wage cost. It is calculated by dividing the price of all paid benefits (direct and indirect) by total hourly compensation(wages plus supervision). Essentially, it measures how much non-wage items are included with each hour of employees’ earning. The benefit wage formula can be an excellent way to compare costs between industries.
Advantages of a benefit wage formula:
1) Sets and maintains an acceptable standard for employee benefits
2) equal treatment and fair treatment for employees
3) increases employee commitment to the organization and increases morale
4) helps to establish open communication between employer and employees
5) recognizes employee contributions through compensation based on skill or tenure, group or individual performance, and specialized skills.