Guide to key HR metrics to track

Why your HR initiatives need performance metrics

HR metrics are key figures for accurately tracking an organization's human capital, people strategy, and how effective its HR programs are. They offer valuable insight into your organization's overall efforts.

Small to medium size organizations sometimes overlook vital human resources metrics because they are considered too complicated or time-consuming to track. However, the benefits of having this data are often undervalued. 

It’s important to know which metrics to measure. After all, you can’t improve what you don’t measure. This guide to HR metrics to track will provide an overview of the metrics you need to know.

Topics covered in this guide include:

• What metrics do you need to track?
• Demographics
• Employee retention rate
• Cost of turnover
• Current and historical compensation data
• Training and onboarding expenses
• Recruiting expenses
• Employee satisfaction and experience
• Absence rate
• Revenue per employee
• Benefits and perks expenses
• Time to fill
• Return on investment (ROI)
• Tips for tracking human resources metrics

What metrics do you need to track?

Choosing a few key HR metrics to track will help you uncover strengths and weaknesses within your organization and help you find the tools you need to understand which areas need improvement.

HR metrics help you:

• Tap into the quality and stability of your workforce
• Understand if HR initiatives are working
• Make informed decisions to recruit and retain the best staff
• Spend your HR budget wisely
• Set a foundation for long-term organizational success
• Establish a business strategy

Now that you know you need to be gathering and tracking HR data and why it's important, the next step is figuring out what to track. Different data provide different insights. It helps to identify your goals, so you know what data to gather and track to measure performance against those goals.

This guide covers how to calculate specific return on investment (ROI) measurements and tips for how to track HR data.

Below are the top HR data points any business can track that will give strategic insights into HR trends, costs, efficiencies, productivity, and success.

Demographics

Your HR department should track your overall employee demographics and employee headcount over time to measure growth and diversity. This includes workforce age, gender, education level, and how long your employees have been with your organization.

Employee retention rate

Track your employee retention rate to understand how your retention strategies are performing and gauge employee morale. Pair this metric with your employee turnover rate and the cost associated with turnover to get a sense of how much your organization spends on replacing workers who leave.

Tracking this data helps organizations make data-driven decisions about recruitment strategy, hiring, onboarding, retention, and HR policy.

Calculating your employee retention rate

Your employee retention rate is a helpful statistic for an employer to calculate—both periodically (ex: quarterly or bi-annually) and as a benchmark. The formula is simple. Divide the number of employees who left during a period of time (such as a year) by the total number of workers at the end of a period to get the percentage.

Standard retention rates are anywhere from 70% - 85% but can vary significantly by industry and calculation method. For example, you may measure only your voluntary turnover rate (such as workers who quit for other opportunities) or all terminated workers.

You can even break down your retention rate by department or manager. This is known as a retention rate per manager.

Cost of turnover

Knowing and tracking the cost of losing an employee will help you make more strategic decisions about benefits and retention activities. You should also monitor new hire turnover, or what percentage of new hires leave within their first 90 days or first year of employment.

How to find your turnover rate

The example below shows that the company has 24 employees and four workers left during Q4.

According to the U.S. Bureau of Labor Statistics' Job Openings and Labor Turnover Survey, the average total turnover in the U.S. was 2.8% for quits and 0.9% for layoffs in June 2022. The total quits rate for 2021 was 32.7%.

How to calculate the cost of employee turnover

The cost of losing an employee varies by industry and role at the company.

Here are estimates based on a Center for American Progress (CAP) study you can use to estimate your costs:

• Less than $30,000/year: 16% of annual salary
• $30,000 - $75,000/year: 20% of annual salary
• $75,000+/year: Up to 213% of annual salary

Of course, each company is unique.

With the right data, you can calculate your specific cost of employee turnover by taking into account the following factors:

• Lost productivity
• Lost employee engagement
• Hiring and recruiting costs
• Orientation and training costs
• Cultural impact on your organization, which can affect overall employee performance

Current and historical compensation data

Your organization should track compensation data to ensure you are meeting the minimum wage requirements in your area and overtime pay compliance. This also helps to understand employee growth within the company. In addition, it's helpful to know what other organizations pay for comparable positions so you can stay competitive.

How to calculate compensation data

To track historical and current compensation data, collect and analyze the following information:

• Employee name
• Employee class
• Position start date
• Starting salary
• Current salary
• Other wage information relevant to your workforce

Training and onboarding expenses

Do you invest in your workers' success from the start? If you have training or onboarding programs, you need to calculate the training costs to see how much you've invested in onboarding versus the effectiveness of the program.

Calculating your training and onboarding expenses is one piece of understanding your cost per hire and is important for budgeting. Successful onboarding can reduce your hiring costs, and ongoing employee training will help reduce turnover and improve the employee experience.

How to calculate training and onboarding expenses

To calculate training and onboarding expenses, include the following:

• Personnel time (time spent to train, prepare, etc.)
• Training materials and supplies, including subscriptions and memberships
• Meeting space, if applicable
• Social activities

This data can be collected in a budgeting spreadsheet or flagged in accounting software for easy tracking and analysis.

Recruiting expenses

Your recruiting expense is the other piece of your cost to hire. You can use this information and your recruitment data to see which job posting platforms your eventual hires find you on to determine which ones produce quality candidates for your organization.

How to calculate recruiting expenses

To calculate training and onboarding expenses, include the following:

• Advertising costs
• Recruiting software fees
• Networking
• Personnel time (time spent screening, interviewing, etc.)
• Any fees for promoting job ads on job boards such as Indeed or LinkedIn

This data can be collected in a budgeting spreadsheet or flagged in accounting software for easy tracking and analysis.

Employee satisfaction and experience

Employee satisfaction data, typically collected through employee surveys, are an important indicator of morale and company culture. Satisfied workers stay at your organization longer, are more productive, and help reduce recruitment costs.

How to calculate employee satisfaction

An easy way to measure employee satisfaction is with a pulse survey. Free survey tools are available online, such as Google Forms, or you can use a third-party specialist. 

When creating a survey, keep it simple. Include a few targeted questions about satisfaction, culture, growth, pay, benefits, advancement, etc.

Absence rate

Absence rate is a simple measurement that helps you understand how many days employees are missing (no call, no show) and can indicate employee dissatisfaction and disengagement.

How to calculate absence rate

Absenteeism is defined as workers missing work due to personal illness, personal time off, or other reasons that usually exclude paid time off. An absence rate is a simple measurement that helps you understand how many days employees are missing on average.

Absence rate = absent days ÷ (average total employees x number of work days available per employee)

Revenue per employee

Revenue per employee (RPE) shows you how much revenue each employee generates for your organization. A higher number represents higher employee productivity and efficiency. This metric mainly applies to for-profit organizations, though not always. It's also vital to note that some employees may not directly contribute to sales or higher revenue but are still essential members of your team.

How to calculate revenue per employee

In general, you take the total revenue generated over a period of time, such as the previous year, and divide it by the total number of employees.

For example, if you had $1 million in revenue last year with 40 full-time employees during that period, you'd divide $1 million by 40, which comes out to $25,000 per employee.

Benefit and perks expenses

Calculating your benefits and perks expenses helps you budget and understand how much your benefits package costs you per employee.

Offering competitive benefits is extremely important for attracting and retaining top talent for your organization. You need to ensure your benefits budget per employee is high enough to recruit and retain workers, but it should also be realistic and affordable.

How to calculate benefits and perks expenses

Each company has a unique package of benefits and perks.

To calculate benefit and perks expenses, include the following, as applicable:

• Benefits (such as contributions to health insurance, employee stipends, tuition reimbursement, retirement, and other perks)
• Administrative costs
• Supplies (additional supplies provided to employees in the workplace, such as free snacks, party supplies, and more)
• Employer-provided cell phones

This data can be collected in a budgeting spreadsheet or flagged in accounting software for easy tracking and analysis.

How to reduce benefit costs

If you have a high benefit cost per employee, you might be tempted to cut back on the benefits being offered. However, this can increase turnover and absenteeism rates as your workers look elsewhere. 

You can send out an employee benefits survey to determine which benefits your employees value the most. If there are benefits that you currently offer with little to no use, you can cut those benefits without worrying about any adverse side effects. 

You should also consider alternatives to traditional employee benefits. Personalized benefits provide increased flexibility for your workers while helping to reduce your overall benefits costs. For example, you can offer a tax-free health reimbursement arrangement (HRA) in place of traditional group health insurance. This allows you to reimburse your employees for their qualifying medical expenses, such as individual health insurance premiums, giving them more freedom to use their benefits on the medical expenses they want.

You can also offer a variety of employee stipends for categories such as health, wellness, and remote work expenses. This enables your employees to get reimbursed for additional expenses, such as gym memberships. 

Your employees will value your new individualized benefits, and you get better cost control by setting maximum monthly allowances for reimbursement.

Time to fill

Similar to recruiting and hiring expenses, knowing your time to fill a position will help you understand the true cost of employee turnover. Keep in mind that this is heavily affected by current economic conditions and the public perception of your organization. The longer it takes to recruit for a position, the more it costs to fill the position.

How to calculate time to fill

Time to fill a position (or time to hire) can be measured with a simple calculation:

Time to fill = average days a job is open before it is filled.

For this calculation, track the following inputs:

• Position and department
• Date job is open/posted
• Date offer is accepted and/or date candidate starts

This calculation can be tracked using spreadsheets or using recruiting software that tracks applications and hiring.

Return on investment (ROI)

Knowing your return on investment (ROI) is key to making strategic decisions for your organization. ROI is a performance measure used to evaluate the efficiency of an investment.

How do I calculate return on investment (ROI)?

To calculate ROI, the payback (return) of an investment is divided by the cost of the investment and multiplied by 100 to get a percentage.

ROI = [(payback - investment) / investment)] * 100

Tips for tracking human resource metrics

HR metrics should be simple, clear, and connected to your organization's goals and priorities. Here are six tips for tracking HR data as you consider which data points matter to your organization.

1. Know why each HR metric matters

As you collect and track HR data, keep in mind why you're collecting the data and why it's important to your organization. If the data isn't connected to an organizational priority, don't spend the time tracking or analyzing it.

Without a good idea of why your ROI and metrics matter, you won't be able to develop a cohesive business strategy.

2. Keep it simple

HR metrics shouldn’t be complicated. It likely won’t be used if the metric isn’t simple, clear, and easily gathered and calculated. Track and collect simple, straightforward information that will provide useful insights into your HR and organizational objectives.

3. Identify how you will track data

Many tools are available to track HR data, from spreadsheets to comprehensive human resource management systems. An important step is to identify which data you will collect and how.

4. Know your audience

As you collect HR data, some information will be more insightful to HR, and others will be more insightful to stakeholders like the owner or CFO. Remember the metrics that matter most to your audience as you present information.

5. Connect HR metrics to organizational objectives

The most powerful and useful HR data connects HR metrics to business objectives. If you've collected the data, be sure to put it into use.

6. Don't just file data away - share it

You've collected a lot of great HR data. Don't just file it away. Analyze it, learn from it, and share it with your leadership team. Then create a plan with actionable next steps to get you to your goals.

How to use your results

When it comes to HR ROI calculations, the goal is to use the information to make smarter HR decisions, spend company money more wisely, and create a high-performing and productive workforce.

HR data that leads to action

Data without analysis and action is just numbers on a screen. Use your HR data to understand trends, issues, and opportunities. Then, take action to make changes based on your learnings.

To make the most of your HR ROI calculations:

• Connect the HR data to business objectives and goals.
• Use the data to drive organizational improvements. Learn about what is working and not working, then make changes based on what you learn.
• Schedule regular times to review the data and put it into action. Strong habits produce strong results.
• Communicate learnings and recommendations to key decision makers.

Data management options when calculating HR ROI

An important step in tracking HR data is developing a system to track and record information. How you track and analyze the data will depend on what you are tracking. Don't worry, the data management system you choose doesn't need to be overly complex. But it does need to be consistent, time-efficient, and scalable.