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When it comes to evaluating staff performance, a mix of metrics can be used. These include key performance indicators such as turnover and training costs, as well as the motivational aspects that contribute to employee engagement. In order to find true success in evaluating any business function or product, one must make sure they have enough data points from different perspectives for analysis.
Employers utilize human resources (HR) metrics to assess how their human capital-related expenses and activities affect overall company performance. The most important component of creating and maintaining HR metrics is to fully comprehend how your personnel might be channeled inside the business to optimize their influence.
With an HR management software like Zenefits, you can keep track of the HR-related KPIs that are important to your company. It brings together all of the tools you need to boost productivity and employee engagement, such as goal management, 360-degree performance evaluations, and one-on-one meeting management, in one convenient location.
1. Employee Revenues
The worth of workers to your business is calculated using revenue per employee. This is just a cost-benefit analysis of human capital. It’s more about the math and value in this scenario than any one member of your team.
Total revenue divided by the total number of workers equals revenue per employee.
There is no suggested range since, depending on your sector, it might range from $200 to hundreds of dollars every day. What matters is that workers bring in more money than they cost to recruit, but there are factors to consider, such as a startup environment or a salesman who may not make their first major sale for months.
2. Hourly Rates
The average amount of money, resources, and time your organization devotes to creating hiring is known as the cost per hire. This measure is associated with a recruiting budget rather than a one-time hire.
A recruitment budget, for example, would decide that if your firm expects to acquire 10 individuals in a fiscal year and the cost per hire is $2,000, your budget should be about $20,000. This amount would be used to pay the expenses of recruiting, hiring, and onboarding a new employee.
It’s critical to account for all variable, direct, and indirect expenses associated with each hiring. This includes a proportionate cost of your applicant tracking system (ATS) if the organization has one, as well as recruiting marketing, background checks, onboarding, and training fees.
All recruitment and HR personnel expenses are included in the cost per hire. The number of new employees
3. Turnover of existing and new employees
Staff turnover is a metric used to assess employee retention and satisfaction at an organization. A 20% turnover rate is believed to be about normal in the United States, as high as it may seem. An excellent objective to strive for if you have the capacity to make a deliberate effort to decrease that turnover percentage is about 10% or less.
A high staff turnover rate is an expensive aspect of the firm to ignore. Every time an employee leaves your company, you spend money to recruit, interview, hire, onboard, and train them. Employee turnover expenses might range from 50 percent to 60 percent of an employee’s yearly compensation.
Employee turnover over time and new employee turnover within 90 days are two kinds of employee turnover indicators to examine.
Employee Attrition
To determine employee turnover over time, multiply your total employee headcount by the number of workers who have left for whatever reason over that time period (usually companies use the calendar or fiscal years).
The number of employee terminations divided by the average number of workers is the turnover rate.
New Hires Who Leave Within 90 Days (Employee Turnover) Divide the number of new recruits who resign in the first 90 days by the total number of new hires in the same time period to get this measure.
New recruits who depart (within 90 days) x 100 = Percentage of new workers that leave in 90 days
4. Productivity of Employees
Since many firms across the world are transitioning from remote workforces as an advantage to a requirement, this may be one of the most touted HR metrics to follow in 2021.
Since the surge in remote workforces in 2020, this movement in workforce location and expectations must be examined to see whether the system is functioning and for which workers it is working.
Productivity among employees A single employee’s rate is the sum of the company’s income and the number of workers on the payroll.
When you compare the data from 2020 to prior years, you can see how successfully your remote-based workforce-related adjustments are benefiting your company.
If you see a steady decline in production, it’s probable that personnel are overworked or coping with other challenges. Knowing how much time an employee needs to be productive within a day or week is very crucial when managing remote staff (include times for rest breaks, meal times, etc.).
5. Inclusion and Diversity
True diversity in the workplace entails more than merely improving the balance of your personnel groups. It also entails having employees from many backgrounds and identities working at all levels of your company. This aim also requires a purposeful effort to diversify your management and teams.
Sending anonymous employee questionnaires to your team is one approach to monitor your diversity and inclusion initiatives. Understand the proportion of diversity in your recruiting to measure your KPIs.
Total Company Hires (during a period) x Categorized People Group Hires = People Group-specific Diversity Rate
Obviously, historically, marginalized groups such as women and people of color have been disproportionately affected by diversity failures. Still, these are only a handful of the numerous under-represented populations in the workforce, so keep that in mind when you assess your criteria.
Within Google, the company keeps track of worker diversity. It also examines the effect of its own diverse recruitment and hiring initiatives on the workplace.
(Source: Google’s Annual Diversity Report)
6. Equal Pay for Equal Work
Pay equality is a method of removing sex and racial discrimination from your company’s wage-setting process. The purpose is to determine fair, reasonable, and equitable employee remuneration.
To guarantee that workers in comparable tasks are paid evenly across gender, you may create equity criteria by comparing characteristics such as employee performance, education, experience, and management or supervisory levels.
Glassdoor provides a simple tool for us to examine and quantify a company’s gender pay gap. The easiest way to do this is to look at the following: Men’s average compensation as a group against women’s average income as a group.
Gender Pay Gap = Average Male Pay – Average Female Pay
7. Percentage of hours spent in overtime
When you calculate overtime as a percentage, you can see how well you’re managing your schedule and total full-time equivalent (FTE) workforce. Employers are well aware that overtime is costly, and they like to avoid paying it if at all possible (overtime compensation is one-and-a-half times an employee’s regular salary, per hour worked).
Use the method below to compute overtime as a percentage. The proportion of your payroll that was allocated to overtime charges will be shown in this outcome.
Overtime pay as a percentage of total payroll = Overtime pay as a percentage of total payroll
8. Absenteeism
The cost of ongoing employee absence may be deceiving and difficult to calculate. However, the consequences of absence may have a negative influence on your company’s bottom line and overall success (including a drop in morale and unfinished projects that could impact customer satisfaction).
You’ll need to measure this typical workplace problem to get a handle on it. The most common aim for “acceptable” absence rates in most firms is approximately 2.8 percent.
Absenteeism = Work Days Missed / Total Scheduled Work Days
9. Employee Profitability
This next measure is quite intriguing. This is based on your most recent 12-month profit per employee (PPE). When calculating PPE, keep in mind that the outcome should be seen as net income (hence “profit”). The formula is straightforward: net profit from the previous 12 months divided by the current number of FTE workers.
Net profit (from the previous 12 months) divided by the number of employees Equals profit per employee Total number of full-time workers
For example, if you’ve increased your workers, be sure to account for their overhead expenses when estimating PPE. This HR statistic aids businesses in determining whether their personnel numbers are suitable and if inefficiencies exist within their processes.
10. Per-employee Healthcare Costs
This measure might assist you to figure out how much of your budget goes for employee health insurance. In 2019, the average cost of healthcare insurance for a family of four was $20,576 per employee. Employees contributed an average of $6,013 toward the cost of their healthcare coverage out of that total.
Employees and employers alike are seeking methods to save expenses while still providing excellent benefits to team members and their families, since these linked expenditures continue to rise year after year. The first step in identifying how your organization spends its resources in a particularly costly line item on the profit and loss (P&L) statement is to track this expense.
To compute this measure, add up all of your contributions to your workers’ health-care premiums over the course of a benefits year and divide by the number of employees who are covered.
Health-care expenses per employee are calculated as follows: total healthcare costs divided by the number of workers who have signed up for healthcare coverage.
11. Employee Training Expenses
Assessing training expenditure per employee is crucial because it allows you to see how much money you spend on employee training over the course of the year vs your budget. According to Training Magazine, organizations in the United States paid an average of $1,286 per student in 2019, up from $986 per learner in 2018.
It’s not difficult to calculate this measure. To begin, calculate the total cost of your company’s entire staff training, including all associated expenses such as travel, course fees, and the cost of your learning management system (LMS). This figure is multiplied by the total number of workers on the payroll.
Total training expenditures divided by the number of workers equals training spend per employee.
12. Return on Investment in Training
While this requires a little more math, it addresses the crucial question, “Is our training paying off?” To determine this measure, you must first evaluate total employee productivity using performance indicators. This statistic often incorporates data from your team’s sales success in a certain area or product line. This should also contain a customer loyalty evaluation, either inside a single product or service line or across the whole firm (also known as net promoter scores) (NPS).
The cost of staff training minus the value of improved performance equals the training return on investment (ROI).
Employee Net Promoter Score (NPS)
Employee Net Promoter Score (eNPS) is a subset of the original Net Promoter Score (NPS) when it was initially introduced. In a nutshell, this measure determines how eager your workers are to serve as brand ambassadors for your business or brand. Although each firm must select what is acceptable to them, HR Technologist states that a score in the range of 10 to 30 (out of 100) is regarded as satisfactory, and a score of 50 is considered great.
Employers may sift through this by asking rater questions, such as “on a scale of zero to ten, how likely are you to recommend this firm as a place to work?”
14. Per-employee HR Cost
This statistic can help you estimate the total cost of HR assistance whether you have an HR manager or another individual on your team who handles HR-related tasks like payroll or new recruit orientation and training. Divide the total remuneration of your HR team members, or the percentage of the work of the person who supervises these HR activities, by the number of employees on payroll for the most accurate calculation.
HR per-employee costs = total HR pay and benefits divided by the number of workers
Small to medium-sized businesses, on average, have one HR FTE for every 100–150 workers. As a company grows, this ratio shifts, with HR experts taking on increasingly specialized positions in the HR department, such as subject matter expert (SME) jobs.
You’ll know how much your HR salary and benefits cost each pay period if you use an HR and payroll solution like Zenefits. You’ll also have a good idea of how many staff you have, which makes this measure simple to compute.
Success of the Employee Referral Program
We believe in employee referral programs, despite the fact that they are more difficult to measure. Statistics demonstrate that they consistently provide us with the best personnel. If you haven’t already done so, take the time to do so and then convey the policy to your company (which normally includes employee referral incentives). Referral programs might help you build a pipeline of qualified candidates as part of your recruiting strategy. To figure it out, multiply the number of vacant jobs by the number of recommendations you’ve interviewed, qualified, and employed.
Number of referrals x Number of vacant positions resulting in recommended hires Equals Employee referral program success
According to Social Talent, on average, 47 percent of job applicants recruited via an internal employee reference stay with your company for up to three years longer than workers who are not suggested. Only 14 percent of new recruits via job sites, on the other hand, remain with the firm for the same amount of time.
16. Affordable Care Act (ACA) Compliance and Benefits (Required by Law)
This measure represents the needs of all businesses with 50 or more full-time equivalent (FTE) workers. Employers are required by the Affordable Care Act (ACA) to disclose their health insurance options to their companies.
The Internal Revenue Service (IRS) provides thorough information on how small companies may collect and submit ACA data. These computations will be handled for you if you have a healthcare benefits broker or provider. Gusto, for example, is an HR or payroll company that not only assists you with obtaining benefits and providing essential ACA reporting but also with other HR-related issues.
17. Equal Employment Opportunity Commission (EEOC)
Employers with 100 or more workers are required to file yearly reports with the Equal Employment Opportunity Commission (EEOC), which enforces federal anti-discrimination rules. The Equal Employment Opportunity Commission (EEOC) protects employees and job candidates from discrimination based on race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability, or genetic information, and workplace harassment by managers, coworkers, or others.
Employers most typically measure these indicators by conducting a private poll of each employee’s fundamental protected groups. If you need to submit an EEOC report, this is an excellent resource, but smaller organizations (those with less than 100 workers) may use it as a model for what questions to ask in their survey.
Finally, EEO-1 reporting may be a time-consuming procedure, particularly if your company has never done so before. The EEOC also provides an example form that may be used as a reference while completing this procedure.
Final Thoughts
Monitoring the effectiveness of your HR staff and employee-related KPIs is critical to your success. These indicators provide your firm with the crucial and sometimes overlooked data it needs to determine whether or not it is spending its resources wisely.
Frequently Asked Questions
What are the most important HR metrics?
The most important HR metrics are the number of applicants, so more applications is always good.
What are the most important HR KPIs?
The most important HR KPIs are the number of hours worked, the number of sick days taken in a year, and how many employees work at your company.
What are the 7 major HR activities?
The 7 major HR activities are the following: high-intensity resistance training, low-intensity speed, agility training, dynamic balance exercise, and plyometrics exercises.
