13 Important HR Metrics & How to Track Them

Employers use human resources (HR) metrics to measure how their human capital-related costs contribute to overall business performance. HR Metrics 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 metrics you should know to evaluate the performance, health, and effectiveness of your human resource activities. You can use these metrics when comparing your business to other companies of a similar size and industry.

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.

What’s important is that, on average, employees bring in more 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 rate of turnover, 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. To measure this metric, calculate the net profit from the most recent 12 months and divide it by the current number of full-time equivalent (FTE) employees.

Like with revenue per employee, obviously the higher this number the better for your business. It can also be impacted by the same factors as revenue per employee.

Full-time Equivalent (FTE) Employees

Several HR metrics, including profit per employee, require calculating full-time equivalent (FTE) employees, which can be complicated. There are many factors to take into account. Learn how to calculate this metric using our What is FTE? article.

Calculating FTEs is especially important when it comes to benefits compliance. The Affordable Care Act (ACA), for example, requires employers with 50 or more FTEs to provide health insurance.

If you have a healthcare benefits broker or provider, such as Rippling, they will manage these calculations for you. Rippling is an all-inclusive HR provider that helps you obtain benefits and provides mandatory ACA reporting as well as other aspects of HR. Additionally, you can begin your relationship under a professional employer organization (PEO) and seamlessly transition when your company grows and no longer needs a PEO.

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 payroll or execution of 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.

* Total benefits in this example calculated using the example in metric #4 below

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.

Since healthcare costs are continuing to increase each year, employees and employers alike are looking for ways to cut costs yet have rich benefits for team members and their families. Tracking this cost is the first step in determining how your company is spending its resources.

If you find your costs are rising higher than you deem affordable, consider using a PEO, which pools together a large grouping of small businesses to offer affordable large-company benefits.

5. Cost Per Hire

Cost per hire is the average amount of money, resources, and time your company allocates to hiring. This metric attaches to a recruiting budget rather than a one-off recruitment.

It’s important to include all variable, direct, and indirect costs of each hire. This includes recruitment ads, background checks, onboarding and training costs, and even a proportional cost of your applicant tracking system (ATS), if the company has one.

6. Employee & New Employee Turnover

Employee turnover can help determine how satisfied employees are at your company. The average turnover rate in the US is around 20%, although that number has jumped during the COVID-19 pandemic.

A high employee turnover rate is costly to a business. Each time an employee departs from your organization, you dedicate the expense to recruit, interview, hire, onboard, and train a new employee. Historically, the costs associated with employee turnover have been reported to be as high as 50%–60% of an individual employee’s annual salary.

There are two types of employee turnover metrics to consider—employee turnover over a period of time and new employee turnover within 90 days.

See our article on employee retention for tips on how to lower your employee turnover rate.

7. New Hire Diversity & Inclusion

True diversity in your workforce involves more than just having 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.

It is projected that by the year 2024, almost 50% of workers in the US will be from a diverse class.

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.

You can calculate 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.

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 gap among other diversity groups (ethnicity, disability, etc.).

9. Overtime Percentage

Calculating overtime as a percentage tells how efficiently you are managing your scheduling and overall FTE staff. To calculate overtime as a percentage, take your overtime pay amount and divide by your total payroll, then multiply by 100. This result will show you what percentage of your payroll was allocated to overtime costs.

If you find your overtime percentage is high compared to similar businesses or it rises month over month, consider training, technology, or other ways to reduce it.

10. Absenteeism Rate

The cost of on-going employee absenteeism can impact your bottom line and company’s overall performance (including employee morale and customer satisfaction).

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 multiply by 100 to get a percentage.

According to the Bureau of Labor and Statistics, the average absenteeism rate in the US is 3.2%. 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 against the total number of employees on payroll.

Assessing training spend per employee will help you maximize the impact of training in your company. In its 2020 survey, Training magazine found that businesses with 100–999 employees spent about $1,700 on training per employee.

12. Training Return on Investment

To calculate this metric, you first assess overall employee productivity based on performance metrics. This metric often includes measures that come from 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).

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.

The average employee referral success percentage is 27%. Anything above this amount is considered a very good percentage in terms of referral success.

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 in determining whether or not the company is spending its resources in the wisest way possible.