13 Important HR Metrics for 2023 & How to Track Them
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
Jennifer Soper is an HR Specialist and staff writer for Fit Small Business, with over 15 years of experience in accounting, payroll, and human resources.
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.
Revenue Per Employee = Total annual revenue ÷ Total number of employees |
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EXAMPLE
Revenue Per Employee = $1,650,000 ÷ 25 = $66,000 |
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.
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 |
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.
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
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 Note: 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. |
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.
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. |
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. According to the US Bureau of Labor Statistics, the average turnover rate for any individual company is 3.8% per year.
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 one to two times 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.
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% |
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.).
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% |
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.
Overtime Percentage = (Overtime pay amount ÷ Total payroll) x 100 |
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EXAMPLE
Overtime Percentage = ($35,450 ÷ $235,500) x 100 = 15.1% |
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.
Absenteeism = (Work days missed ÷ Total work days scheduled) x 100 |
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EXAMPLE
Absenteeism = (12 ÷ 500) x 100 = 2.4% |
According to the Bureau of Labor and Statistics, the average absenteeism rate in the US is 3.6%. 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.
Training Spend Per Employee = Total training costs ÷ Number of employees |
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EXAMPLE
Training Spend Per Employee = $30,000 ÷ 25 = $1,200 |
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 $1,200 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).
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% |
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 |
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EXAMPLE
Employee Referral Program Success = 4 ÷ 10 = 40% |
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.
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