Preliminary communication
Analysis of the Effect of Employee Costs on Company Performance
Željko Požega
; Faculty of Economics in Osijek
Boris Crnković
; Faculty of Economics in Osijek
Abstract
The goal of every economic entity is to accomplish an optimal system of compensation management and to
reach maximum returns through optimal employee investment, raising their motivation and knowledge as
well as developing their abilities and skills. In order to reach this goal of maximizing company performance
it is necessary to systematically approach the management of human resources within a certain economic
entity and to create the fairest material and non-material reward and punishment system by using compensation
management methods. This in turn will bring about a positive working atmosphere in the company,
where employees will rapidly and easily adjust to changes, interact and co-operate with one another at a high
level.
This research, which studies the effect of employee costs on company performance, is divided into three
chapters. The first chapter provides a brief theoretical overview of the importance of compensation management
in human resources administration and reaching business efficiency, i.e. the different possibilities
of creating a reward and punishment system in a company which aims to organise an optimal working
atmosphere. The second chapter demonstrates the applied methodology and illustrates the information
from different companies, which has been used in this research and analysis. The information comprises statistical
data of employee costs, income, profits and losses from a sample of companies from the Republic of
Croatia in 2008. The third part deals with the analysis and interpretation of the research results which show
the effect of employee costs on the income and company performance, also expressed per employee.
The goal of this research is to test the hypothesis that companies with higher employee cost, i.e. with higher
investment in human resources, on average obtain a higher income and a higher profit per employee and are
more efficient and more successful on the market. From the given hypothesis, one can derive the hypothesis
that compensation management in human resources administration is of crucial importance for the management
of an economic entity and that strategic planning of investment and expenditure per employee is a
prerequisite for the competitiveness of a business, its development and survival in an increasingly demanding
market race.
Keywords
compensation management; human resources; employee costs; company performance management; revenue
Hrčak ID:
57838
URI
Publication date:
5.7.2010.
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