Under the HRPA Human Resources Competency Framework (Functional Domain: Total Rewards), HR professionals must be able to assess and monitor compensation cost indicators to evaluate the organization’s pay competitiveness and financial sustainability.
The two most commonly used compensation cost indicators are:
Average Employee Earnings (AEE)
Represents the average total compensation (wages, salaries, and benefits) paid per employee.
Used to measure internal equity and external competitiveness over time.
Compensation Cost Ratios (CCR)
Express total compensation costs as a percentage of revenue or operating costs.
Used to evaluate the relationship between labour expenses and productivity or profitability.
Extract:
“HR professionals use average employee earnings and compensation cost ratios as key indicators to evaluate the efficiency and competitiveness of total compensation strategies.”
(HRPA Competency Framework – Total Rewards, CHRP Level, Key Competency: Analyze Compensation Metrics and Financial Impact)
Option Analysis:
A: Employee productivity is a performance metric, not a compensation cost indicator.
B: Combines one cost indicator with a productivity measure, so incomplete.
C: Correct — includes both recognized compensation cost indicators.
D: Net income reflects profitability, not a compensation cost measure.
Therefore, C. Average employee earnings and compensation cost ratios is correct.
Verified Reference Summary:
HRPA Human Resources Competency Framework – Functional Domain: Total Rewards
CHRP Knowledge Exam Blueprint – Compensation Cost Analysis
HRPA Exam Preparation Guide – Compensation and Financial Indicators
