Isn’t it Time You Knew… How Employee Compensation Impacts Human Capital Risk?


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Hourglass

The Analysis

Figure 1 illustrates the relationship between the HCMS Human Capital Risk Index® (HUI) and employee compensation. The HUI uses a broad set of person-centric integrated medical, pharmacy, and lost time metrics (including disability data) to produce the HUI risk score. The HUI score adjusts for most demographic variables such as age and gender.

Figure 1: Human Capital Risk by Annual Salary

High wage compensation associated with less human capital risk

When an employee’s income increases, their HUI risk score decreases. A HUI risk score of 1.0 is average. Employees with annual earnings of less than $25,000 have a higher than average HUI score that is almost 15% higher than employees earning greater than $75,000.

While other factors have been shown to influence both health and earnings, this relationship between salary and human capital risk persists even when controlling for education, age, and gender.

Bonuses can reduce risk

Variable compensation, in the form of overtime and performance bonuses, changes the way people behave by creating incentives for workers to engage in health preservation activities to ensure that they are present and their work is rewarded. If an employee is at work, their efforts will be noticed and compensated for. If an employee is absent, they may have missed the opportunity to be productive and earn bonus compensation.

Moreover, an employee that feels fairly compensated for their labor is less likely to try to utilize health and disability benefits in order to make up for the compensation that they feel they deserve.

Conclusion

An employee’s human capital risk can be reduced with higher salary and bonus compensation. Employees with these benefits are incentivized to stay healthy so that they can be at work more (“a day’s work for a day’s pay”).


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