Key HR Metrics You Should Be Tracking

Human resources manager pointing at data and graphics

HR isn’t only responsible for hiring, firing, and tracking benefits. An important role in HR is to monitor performance and measure productivity to ensure that employees reach their potential and maximize productivity, while also maximizing the cost benefits to the company. HR also tracks whether the organization is living up to its established goals and mission. They do this by utilizing HR metrics, which are benchmarks an organization uses to measure the effectiveness of its human resources. This aids them in building a work environment that is productive, diverse, and profitable.

Some of the HR metrics commonly employed look at employee turnover, cost of benefits per employee, and cost per hire. The statistical data gleaned from these metrics can help you manage and improve performance. Here are some key HR metrics that you should be tracking to maximize employee efficiency and reduce costs. 

Important Human Resources Metrics You Should Measure

1. Cost per hire

Every company has to hire new employees, and the hiring process costs money. Cost per hire, which is the average expense incurred in looking for and interviewing candidates, and eventually hiring the best one, is an important metric to determine whether the value to the organization is worth the cost.

Cost includes internal talent acquisition and training, as well as external agency fees, job postings, etc. To calculate cost per hire, divide the total cost of your hiring process by the number of new employees. The importance of the cost per hire metric is that companies can use it to create recruitment budgets and stick to them. The goal for HR is to optimize cost per hire without negatively affecting the quality of resources being hired.

2. Revenue per employee

Knowing how much revenue each employee generates is important to you. Maybe you have a lot of high-performing employees in the office, but the revenue per employee is low. This could indicate that you have an inequitable distribution of work. The formula for calculating revenue per employee is the total revenue divided by the number of employees.

If the revenue per employee increases over time, this is an indicator that the company is becoming more productive. This is what you should be striving for, but if the company’s revenue per employee is lower than that of similar organizations, this means the company might not be as productive as it could be. You can then look for ways to raise the revenue per employee.

3. Employee productivity 

Employee productivity has increased in importance over the last year or so because of the rise in the number of employees working from home. The knock against remote work has long been that workers aren’t as productive when away from the office, surrounded by a number of possible distractions. The reality is that many employees are even more productive at home where they don’t have to worry about getting ready in the morning to go into the office, commuting, and other things. Employee productivity can be calculated by measuring performance against goals for the quarter or the year. 

Employee productivity has significant value as it helps you gauge which employees are performing well. It allows you to pinpoint the obstacles that might be negatively affecting productivity. You can then focus on helping those employees who are struggling to perform better. This helps not only the employee but the company as a whole. 

4. Workforce diversity

With society as a whole striving for diversity and inclusion, the same is true in the workforce. HR departments should recognize that companies have to be conscious of the need to hire employees from all walks of life. Even if an organization has the best product out there, not having a diverse workforce can hurt sales, recruitment, and overall company health.

Tracking workforce diversity can be done in a variety of ways, including by gender, ethnicity, age, and years of service within your organization. The more diverse the workforce is, the more varied the experiences each individual will bring with them. A positive diversity rate can help improve employee retention and turnover.

Related: Hiring for Diversity

5. Voluntary employee turnover

Generally, the lower your employee turnover rate is, the better it is for the organization. Higher turnover rates mean higher costs per employee because the cost of retaining employees is always less than the cost of hiring and training new ones. But getting rid of those who are underperforming or are not a good fit for the company can be a good thing too.

Tracking the voluntary turnover rate can help you understand what motivates quality employees to leave and what you can do to prevent that. Calculate your voluntary turnover rate by dividing the number of employees who leave voluntarily by the total number of employees. You typically want the turnover rate to be around 10-15%. Any higher might be a reason for concern. 

You can track employee turnover as a whole, but another way to track it is by looking at employees who leave the organization in the first three months, the first six months, or the first year. If this rate is high, you should be looking at what factors might be causing it.  

6. Pay equity

Pay equity is generally related to workforce diversity. Even if you have a diverse workforce, if the pay equity is slanted significantly in favor of one group over another, it serves to nullify or greatly lessen the impact of the workforce diversity metric. A diverse workforce is only effective if compensation is fair among diverse groups. Discrimination based on race, gender, or any similar parameter indicates an unfair pay policy. 

When two people with similar work experience are doing similar jobs, and they have a significant difference in pay, that is pay inequality. Disparities in pay should only be based on factors such as experience, skills, and seniority. Even though state, federal, and local laws exist to protect employees against discrimination, it still persists in the workforce. You should have policies in place to only look at things like experience, attitude, and ability, and not the color of someone’s skin, their age, or their gender.

A benefit of pay equity, along with diversity and inclusion, is that it can help lower employee turnover rates and increase employee retention rates as people stay at workplaces that value diversity.

Related: The Pros and Cons of an Open Salary Policy

7. Rate of employee absences

A certain amount of absenteeism is expected and shouldn’t be cause for concern. It’s a consistent pattern of unplanned leave or absences from work that you should be focusing on. Divide the number of unscheduled absences by the number of employees to arrive at the rate of employee absences. A high rate of absence can be an indicator of low morale or other issues and can lead to reduced productivity, disrupted workflow, and loss of trust.

You can address this issue quickly and efficiently by looking at the four core reasons for a pattern of absenteeism: compensation, communication, benefits, and engagement. Another way to track employee absences is by each team manager, which helps to identify issues that might be present on a particular team.

Related: Employee Incentive Programs To Motivate and Engage Your Staff

8. Overtime percentage

A high overtime percentage can mean several different things. Generally, it’s either common in a particular role, intermittent when meeting deadlines, or a sign of inefficiency in the workplace. Delving into why the rate is high is important. Calculate the overtime percentage rate by dividing the total overtime pay amount by the total payroll.

You can get a good understanding of how well the workforce is being utilized and where issues might be occurring by using the overtime percentage metric. Inefficient usage of time by employees that leads to overtime can be corrected by implementing better time management techniques. A situation where there aren’t enough employees for the amount of work a company has, which then leads to consistent overtime, indicates a need to hire more employees. The key is to determine why overtime is required and implement a solution. 

9. Healthcare cost per employee

Organizations build health insurance costs into the budget for each employee. Tracking the healthcare cost per employee can help you understand and determine the amount of money that should be allocated for healthcare per employee. To calculate the healthcare cost per employee, take the total healthcare costs for the organization and divide it by the number of employees who sign up for healthcare.

Healthcare costs in the United States are very high. Job seekers looking for an open position in your company want to know how good the health insurance is. The best candidates might pass on an offer simply because the benefits aren’t good enough. To attract and retain a productive workforce, you should make sure that the healthcare costs per employee are reasonable and balanced. The challenge is figuring out ways to cut costs but also provide employees with the maximum benefits. 

Related: Ways To Lower Your Employee Benefits Cost

10. Training expenses vs effectiveness and efficiency per employee

This metric helps you track development costs and can help you make better choices in developing personnel. Training expenses that result in more effective and efficient workers is your goal. You can assess the effectiveness of training by measuring what people learned. This is done by setting training goals and monitoring whether employees are reaching those goals after training. Another way to measure effectiveness is over a period of time.  Effective training should help the employee become better in their job, raising their performance level. 

Measuring the efficiency of training helps you track employee satisfaction with training processes. Training that benefits the employee will lead to more productivity and better employee retention. On the other hand, a lack of development opportunities can lead to employee dissatisfaction and turnover. 

Related: Highly Effective Strategies for Employee Retention

4 Corner Resources Can Help You With HR

HR metrics are an important tool and can have a significant impact on your company if you use them. By analyzing the data and drawing conclusions from it, you can increase productivity, reduce costs, and improve employee satisfaction, all of which are beneficial to your organization. 

If you’re looking for an experienced HR team to help your company grow, outsourcing with 4 Corner Resources is a great option. We’ll track all of these metrics for you, helping you to hire better.

Contact us today to see how we can help.

About Peter Porebski

Peter Porebski is the Operations Manager at 4 Corner resources. A graduate of the University of Central Florida he has over 8 years of operations and process improvement experience with 5 being in the Human resources and staffing industry. In previous roles he worked to manage and analyze production flow trends and determine areas of improvement in quality control for the commercial retail industry. His areas of interest include web development, information technology, data analysis and reporting. He lives in Orlando, Florida with his wife and two cats.