Employers use human resources (HR) metrics to measure how their human capital-related costs contribute to overall business performance. These can also be used to establish a baseline for your business to track productivity, revenue, training, and more. As your numbers increase (or decrease) around this baseline, you can determine steps to take, as necessary, to improve performance.
We compiled 13 of the most common HR metrics to evaluate the performance, health, and effectiveness of your human resource activities. You can use these metrics examples when comparing your business to other companies of a similar size and industry.
- 1. Revenue Per Employee
- 2. Profit Per Employee
- 3. Cost of HR Per Employee
- 4. Healthcare Costs Per Employee
- 5. Cost Per Hire
- 6. Employee Turnover
- 7. New Hire Diversity & Inclusion
- 8. Pay Equity
- 9. Overtime Percentage
- 10. Absenteeism Rate
- 11. Training Spend Per Employee
- 12. Training Return on Investment
- 13. Employee Referral Program Success
- Frequently Asked Questions (FAQs)
- Bottom Line
1. Revenue Per Employee
Revenue per employee, which calculates the value of employees to your operations, helps a business know how efficiently they are utilizing their employees. This metric is determined by dividing the total annual revenue by the total number of employees in your organization. This will let you know how much revenue you generate per employee in your business. The higher the number, the greater the productivity.
| Revenue Per Employee =Total annual revenue ÷ Total number of employees |
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EXAMPLE
Revenue Per Employee =$1,650,000 ÷ 25 =$66,000 |
Why It’s Important
On average, employees should bring in more revenue than it costs to hire them. In our example above, as long as your employees are paid less than $66,000 per year per employee (on average) you are bringing in more revenue than it costs to employ. Ideally, you will want that number to be significantly higher than per-employee pay. Factors that can affect this number include turnover rate, industry, and age of your business.
2. Profit Per Employee
This metric reflects your company’s net income per employee based on your most recent 12 months. Calculate the net profit from the most recent 12 months and divide it by the current number of full-time equivalent (FTE) employees to measure profit per employee.
| Profit Per Employee =Net profit (from the last 12 months) ÷ Number of FTE employees |
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EXAMPLE
Profit Per Employee =$585,000 ÷ 75 =$7,800 |
Why It’s Important
Like with revenue per employee, the higher this number the better for your business. When you understand the profit each employee brings to the company, you can see if you have the right amount of staff. However, this is subjective, as more than likely some employees will bring more profit into the company than others. For example, someone on your sales team will always bring more profit to the company than someone who orders parts.
3. Cost of HR Per Employee
If you have an HR manager or another person on your staff who performs HR-related duties, such as handling payroll or conducting new hire orientation and employee training, then this metric will help assess the overall cost of HR support. To best calculate this, take the total compensation of your HR team members, or the portion of the job of the person who manages these HR duties, and divide by the number of employees on payroll.
| Cost of HR Per Employee =Total HR salary and benefits ÷ Number of employees |
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EXAMPLE
Cost of HR Per Employee =$230,119.04 ÷ 150 =$1,534.13 |
* Total benefits in this example calculated using the example in metric #4 below
Why It’s Important
When you know how much your HR department is costing you per employee, it is easier to determine if you have under- or over-saturated your human resources department. You can refer back to the revenue per employee or profit per employee to see if you are fully utilizing your human resources employees in a way that helps the company’s overall ROI.
If there is some wiggle room there, and you have an increasing need, then you can hire new employees. If you are paying out more than you are gaining, you may want to see where you can eliminate or combine some positions.
4. Healthcare Costs Per Employee
This metric helps you understand how much of your budget is being spent on employee health insurance costs. To calculate your healthcare costs per employee, sum up what you contribute to your employees’ healthcare premiums over a benefits period (i.e., one month) and divide it by the number of insured employees.
| Healthcare Costs Per Employee =Total healthcare costs ÷ Number of employees signed up for healthcare |
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EXAMPLE
Healthcare Costs Per Employee (monthly) =$83,455 ÷ 133 =$627.48* |
*This example shows the full premium amount paid. If you contribute only a portion of that premium to each employee, your costs per month will be reduced by their contribution amount. For instance, if you contribute 50% to insurance premiums your total cost per employee per month would be $313.74.
Why It’s Important
Since healthcare costs are continuing to increase each year, employers are looking for ways to cut costs while still providing rich employee benefits for team members and their families. Tracking this cost is the first step in determining how your company is spending its resources. Assuming you are providing at least partial coverage of employee premiums, it may be wise to shop around for a better deal. However, note that this is a culture-increasing benefit that will help you attract and retain employees.
5. Cost Per Hire
Cost per hire is the average amount of money, resources, and time your company allocates to hiring new employees. This metric attaches to a recruiting budget rather than a one-off recruitment.
| Cost Per Hire =All recruiting and HR staffing costs ÷ Number of new hires |
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EXAMPLE
Cost Per Hire =$20,000 ÷ 10 =$2,000 This would cover costs for recruiting, hiring, and onboarding the new employee. |
*This value can be computed by factoring in internal and external costs. Learn more about what these are composed of in our in-depth cost per hire guide.
Why It’s Important
This metric will help determine if your recruiting budget needs to be adjusted. When evaluating your budget, it’s important to include all variable, direct, and indirect costs of each hire. This includes recruitment ads, background checks, onboarding new employees and training costs, and even a proportional cost of your applicant tracking system (ATS) if the company has one.
6. Employee Turnover
Employee turnover can help determine how satisfied employees are at your company. According to the US Bureau of Labor Statistics, the average turnover rate for any individual company is 3.5% per year. The arts and entertainment industry saw the highest rate in one month (8.2%) with finance and insurance seeing the lowest at 2.0%.
There are two types of HR turnover metrics to consider—employee turnover over time and new employee turnover within 90 days. The first is used to calculate the overall turnover rate in your company of all employees, both new and seasoned. The second will show you a percentage of your new hires who are leaving your company within 90 days of employment. Both can help you determine steps to take to increase employee retention.
To calculate employee turnover over a specific period of time, you first determine how many employees left your company in that timeframe (usually calendar or fiscal year). Then, take your employee headcount at the start of the period, add the employee headcount at the end of the period, and then divide that number by 2. Divide the number of employees that left the company by the result, and then multiply it by 100 to get a percentage.
Turnover Rate Over Time = (Number of employees who left the company ÷ (# of employees at the beginning of the period + # of employees at the end of the period ÷ 2)) x 100 |
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EXAMPLE
Turnover Rate Over Time = (150 + 113)/2 = 131.5 (37 ÷ 131.5) x 100 = 28.13% |
Why It’s Important
A high employee turnover rate is costly to a business. Each time an employee departs from your organization, you dedicate the expense to finding new employees. This includes recruiting costs, interviewing, hiring, onboarding, and training a new employee. Historically, the costs associated with employee turnover have been reported to be as high as one to two times an individual employee’s annual salary.
If you have a high turnover rate, you can take steps to create a better work-life balance for your employees, which will in turn increase employee satisfaction and productivity. This all leads to a decrease in employee turnover.
7. New Hire Diversity & Inclusion
True diversity in your workforce involves more than just having a better balance within your employee teams. It also means having people from all kinds of backgrounds and identities at every level of your organization. This goal also involves a conscious effort to diversify your teams and management.
To track your metrics and understand the percentage of diversity in your hiring, take your total company hires and divide by a categorized people group, then multiply by 100 to get a percentage.
| People Group-Specific Diversity Rate =(Categorized people-group hires ÷ Total company hires (within a timeframe)) x 100 |
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EXAMPLE
People Group-Specific Diversity Rate =(25 ÷ 85) x 100 =29.4% |
Why It’s Important
To build and maintain a positive company culture, focusing your efforts on hiring a diverse workforce is a critical step all small businesses must take. When you evaluate the metrics to determine your diversity percentage throughout your company, you can focus your efforts on DE&I initiatives. This strengthens your current company culture and helps attract new talent.
8. Pay Equity
Pay equity is a means of eliminating sex and race discrimination in the wage-setting process within your company. The goal is to measure employee compensation so that it is fair, just, and equitable. To calculate this percentage, subtract the lower wage from the higher wage, divide this number by the higher wage, then multiply by 100.
Our example below shows the gender pay gap between the average male pay and the average female pay for the same position at a company when the male pay is higher. You can also use this calculation to determine pay gaps among other diversity groups (ethnicity, disability, etc.).
| Gender Pay Gap =((Average high pay - Average low pay) ÷ Average high pay) x 100 |
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EXAMPLE
Gender Pay Gap =(($100,000 - $86,000) ÷ $100,000) x 100 =14% |
Why It’s Important
When you focus on fair pay practices, you set your business apart as a desirable company to work for. Your employees (in all protected classes) will feel valued, which ultimately will lead to a higher retention rate.
You can calculate pay equity standards by comparing variables such as employee performance, education, experience, and management or supervisory levels to ensure that employees in similar roles are paid equitably.
9. Overtime Percentage
Overtime occurs when your non-exempt workers put in more than 40 hours in a workweek. When this happens, you are required by law to pay them time and a half of their hourly rate for every hour worked over 40. To calculate overtime as a percentage, take your overtime pay amount and divide it by your total payroll, then multiply by 100. This result will show you what percentage of your payroll was allocated to overtime costs.
| Overtime Percentage =(Overtime pay amount ÷ Total payroll) x 100 |
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EXAMPLE
Overtime Percentage =($35,450 ÷ $235,500) x 100 =15.1% |
Why It’s Important
Calculating overtime as a percentage tells how efficiently you are managing the scheduling of your staff. It should be your goal to keep your overtime percentage under 10%, as this is a reasonable goal for maintaining productivity.
If you find your overtime percentage is high compared to similar businesses or it rises month over month, consider providing additional training and development, technology, or other ways to reduce it. For instance, the average number of overtime hours for construction and manufacturing industries is around 40 hours per week—double the typical workweek of a regular employee. This results in excessive costs that businesses in the industries shoulder.
10. Absenteeism Rate
The cost of ongoing employee absenteeism can impact your bottom line and the company’s overall performance. To get a grip on this common workplace challenge, you should measure it by calculating the total number of work days missed divided by the total number of work days scheduled, then multiplying by 100 to get a percentage.
| Absenteeism =(Work days missed ÷ Total work days scheduled) x 100 |
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EXAMPLE
Absenteeism =(12 ÷ 500) x 100 =2.4% |
Why It’s Important
Excessive absenteeism can have a major impact on employee morale and customer satisfaction. According to the Bureau of Labor and Statistics, the average absenteeism rate in the US is 3.1%. If your absenteeism rate is higher than you would like, consider implementing an employee attendance policy or improving employee engagement.
11. Training Spend Per Employee
Calculating this metric is fairly simple. First, determine the cost of your company’s overall employee training, along with all related expenses—such as travel, course fees, and the cost of your learning management system (LMS). This number is divided by the total number of employees on your payroll.
| Training Spend Per Employee =Total training costs ÷ Number of employees |
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EXAMPLE
Training Spend Per Employee =$30,000 ÷ 25 =$1,200 |
Why It’s Important
Assessing training spend per employee will help you maximize the impact of training in your company. Training magazine found that small businesses spent 16% of their budget on learning tools and technology to train their employees. An analysis of your costs to train employees can highlight how effective the training is—if your employees are using their training to enhance their skills and increase productivity, then you are on the right track.
12. Training Return on Investment
To calculate this metric, you first assess overall employee productivity based on certain key performance indicators. This metric often includes measures that come from the sales performance of your team in a particular region or product line. This also should include an assessment of customer loyalty, either within a specific product or service line or throughout the entire organization (this concept is also known as your net promoter scores (NPS).
| Training Return on Investment (ROI) =((Value of increased performance - Cost of employee training) ÷ Cost of employee training) x 100 |
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EXAMPLE
Training Return on Investment (ROI) =($90,000-$30,000) ÷ $30,000) x 100 =200% |
Why It’s Important
If your cost of employee training is equal to the value of the increased performance your percentage would be 100%. This means that you returned the full value of your investment. As a general rule, you want your ROI to be higher than 100%.
13. Employee Referral Program Success
Referral programs, as one part of your recruitment strategy, help create a pipeline of qualified employees. To calculate, use the number of positions you have had open that resulted in referrals and the number of referrals you have hired.
| Employee Referral Program Success =(Number of referrals hired ÷ Number of open jobs resulting in referrals) x 100 |
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EXAMPLE
Employee Referral Program Success =(4 ÷ 10) x 100 =40% |
Why It’s Important
A successful employee referral program will reduce the costs of finding and vetting qualified candidates. As a general rule of thumb, your current employees will bring top-quality candidates to the table. This saves you from advertising costs and hours of searching through resumes to find a qualified candidate.
Frequently Asked Questions (FAQs)
Human resource metrics are measurements that calculate workforce activities, such as headcount, turnover rate, training, or new hire costs. They are used to help small businesses evaluate how much they are spending in certain human resources areas, or areas that are costing the company money.
HR performance metrics will measure the success of your HR department. These metrics include time-to-hire, cost per hire, employee engagement rates, employee turnover rates, revenue per employee, manager effectiveness, and more. You can use calculations based on data or HR analytics software to measure.
HR metrics focus on specific calculations used to evaluate and track metrics within the human resources department. HR analytics is a broader type of metrics measurement that collects HR-related data to help companies make informed and strategic business decisions.
Bottom Line
Monitoring your HR team performance and employee-related metrics is essential to your success. These metrics provide your company with the essential and oftentimes unseen data it needs to determine whether or not the company is spending its resources in the wisest way possible.
