Updated: 7/5/24
15 Valuable HR Metrics we'll be covering
HR metrics are key performance indicators (KPIs) that businesses use to monitor and evaluate various aspects of the workforce. They give employers insights into employee performance, costs related to hiring and training, and the overall health of the workplace, helping to optimise performance and inform future decisions.
When tracking metrics in HR, it’s important to ensure that what you’re measuring aligns with the overall KPIs for your business. This helps you to make sure that your hiring decisions, employee engagement strategies and performance review processes are on the right track to deliver success. While the following HR metric examples offer essential insights into workplace performance, make sure to tailor your performance tracking to your own business context.
In this guide, we’re going to explore 15 valuable HR metrics that you should be measuring:
- Employee turnover rate
- Absence rate
- Retention rate
- Headcount
- Cost per hire
- Quality of hire
- Time to fill
- Time to productivity
- Revenue per employee
- Cost of HR per employee
- Employee engagement metrics
- Training expenses per employee
- Diversity, equality and inclusion
- Overtime
- ROI of HR softwar
1. Employee turnover rate
Employee turnover rate refers to the percentage of employees who leave a company during a certain period, typically calculated on an annual basis and expressed as a percentage. It’s calculated by dividing the number of employees who leave the company during a specific period by the average number of employees in that same period.
High turnover rates may indicate issues with employee satisfaction, workplace culture or management practices, while low turnover rates suggest a stable and satisfied workforce. By analysing turnover rates by department, length of time in the role, or reason for leaving, HR professionals can identify trends and implement targeted strategies to improve retention and foster a more engaged workforce.
Additionally, benchmarking turnover rates against industry averages can help businesses to gauge how attractive they are to new talent compared to competitors. You can learn more about this in our guide to benchmarking employee turnover rate.
2. Absence rate
Absence rate measures the frequency and duration of employee absences during a certain time period, typically calculated on an annual basis and expressed as a percentage. It’s calculated by dividing the total days of absence during a specific period by the total number of possible workdays in that same period.
Excessive absenteeism can lead to increased workloads for remaining employees, missed deadlines, decreased customer satisfaction, and higher costs associated with temporary staffing or overtime pay. By monitoring absence rates, HR professionals can proactively address issues related to employee wellbeing, work-life balance, and organisational culture, helping to minimise disruptions and improve efficiency.
As sickness rates continue to grow year-on-year, it’s important for employers to understand the reasons behind employee absences, and what they can do to minimise absenteeism.
3. Retention rate
Retention rate shows the percentage of employees who remain with a company over a specified period, typically calculated on an annual basis and expressed as a percentage. It’s calculated by dividing the number of employees at the start of a specific period by the number of employees at the end of that same period.
A high retention rate indicates that employees feel motivated, fulfilled and committed to their roles and the company, while a low retention rate may signal issues such as poor workplace culture, ineffective leadership or a lack of career development opportunities. By monitoring retention rates, HR departments can identify areas for improvement and implement targeted retention strategies to reduce employee turnover and increase stability and productivity.
As well as affecting productivity, a low retention rate can lead to increased expenses associated with hiring and training new employees, decreased morale among remaining staff, and potential damage to the company's employer brand.
4. Headcount
Headcount is an important HR metric that refers to the total number of employees in an organisation at any given time, including full-time, part-time, and temporary employees. Monitoring headcount helps HR professionals to better anticipate and budget for changing staffing needs.
Delving deeper into the composition of the workforce by department, location, job role or demographic can help to identify areas of overstaffing or understaffing, assess the impact of recruitment and retention efforts, and align staffing levels with business objectives. It’s a particularly useful HR metric when combined with turnover rate, absenteeism rate, and productivity metrics, providing a more comprehensive understanding of workforce dynamics.
5. Cost per hire
Cost per hire is a crucial HR metric that quantifies the average cost incurred by an organisation to fill a vacant position. It’s calculated by adding up all recruitment-related expenses during a specific period and dividing by the total number of hires within that same period. This could include advertising, agency fees, recruiter commission and onboarding expenses.
Tracking cost per hire allows HR professionals to evaluate the efficiency and effectiveness of their recruitment efforts. They can then identify areas where expenses can be reduced, helping to improve the cost effectiveness of each hire and boosting the profitability of each employee.
6. Quality of hire
Quality of hire measures the impact of new employees on business performance and success. This is one of the more complex HR metrics to track, as it’s less easily quantifiable than other statistics, such as headcount. Factors contributing to quality of hire include skills and competencies, cultural fit, job performance, and long-term potential.
By evaluating quality of hire, HR professionals can measure the success of their recruitment strategies and identify areas for improvement. This helps them to better focus hiring processes to ensure that new hires are a suitable choice, enhancing overall workforce quality.
7. Time to fill
Time to fill is a key HR metric that measures the average time it takes to fill a vacant position from the moment the vacancy is approved until the offer is accepted by a candidate. It shouldn’t be confused with time to hire, which refers to the length of time between a candidate applying for a job and them accepting a job offer.
A lengthy time to fill can lead to higher recruitment costs and lost productivity, as well as increasing the risk of losing potential talent to competitors. Tracking this metric provides insights into recruitment efficiency, identifies bottlenecks in the hiring process, and helps HR professionals to optimise workforce planning.
Implementing an applicant tracking system (ATS) can significantly reduce time to fill by automating various aspects of the recruitment process, such as job posting, candidate screening and interview scheduling.
8. Time to productivity
Time to productivity refers to the amount of time it takes for a new employee to reach full productivity in their role after being hired. While it’s a slightly more advanced HR metric, understanding the factors that influence how long it takes for employees to become fully productive can help to increase workplace productivity and efficiency.
Tracking time to productivity allows HR professionals to identify opportunities for improvement in onboarding processes, training methods and support mechanisms for new hires. Additionally, it helps to set realistic expectations for employee performance and supports resource allocation and project scheduling at the start of a new hire’s role.
Effective onboarding processes play a significant role in influencing time to productivity by ensuring that new employees are able to quickly integrate into their roles and contribute to the organisation.
9. Revenue per employee
Revenue per employee Cost per hire quantifies the amount of revenue generated by each employee over a specific period, typically a financial year. It’s calculated by dividing the total revenue generated during a specific period by the average number of employees during that same period.
This HR metric provides valuable insights into workforce productivity, efficiency, and the overall contribution of employees to the financial performance of the business. Additionally, benchmarking performance against industry standards and monitoring changes in revenue per employee can indicate trends and inform strategic decision-making related to staffing levels, talent management and business growth initiatives.
10. Cost of HR per employee
The cost of HR per employee evaluates the total expenses incurred by a business for HR-related activities and services per employee. It’s calculated by adding up all HR-related expenses during a specific period and dividing it by the average number of employees in that same period. This might include salaries and benefits, recruitment costs, training and development expenses, and overheads relating to HR administration.
HR is an extremely important function, as it supports the people that keep a business running. However, it encompasses many different areas and responsibilities, which can be costly. Understanding the cost of HR per employee allows organisations to optimise budgets to better support business objectives.
11. Employee engagement rating
Employee engagement measures the level of emotional commitment, enthusiasm and dedication employees have towards their work and their employer. This HR metric is typically gathered through employee surveys, which may include questions about job satisfaction, work-life balance, career development opportunities, communication, and leadership.
Tracking employee engagement is crucial for HR departments, as it provides insights into employee morale, and can help HR professionals to better understand retention rates and overall job satisfaction. High levels of employee engagement can increase productivity, improve customer satisfaction, and reduce employee turnover, helping businesses to operate more cost efficiently.
If you find that your rating is low, it’s important to implement strategies to improve employee engagement. Even if engagement is currently high, it’s always worth implementing best practices to ensure that employees remain happy and motivated in the workplace.
12. Training expenses per employee
Training expenses per employee measures the average cost incurred by an organisation to provide training and development opportunities to each employee. It’s calculated by adding up all training-related costs incurred during a specific period, and dividing it by the average number of employees in that same period.
This HR metric includes expenses related to training programs, workshops, seminars, courses, materials, and resources aimed at enhancing employees’ skills, knowledge and competencies. Tracking training expenses per employee provides insights into the organisation’s investment in employee development, and the effectiveness of current training methods. As well as informing future budgets, this helps HR professionals to create successful employee engagement and development initiatives.
13. DE&I metrics
DEI metrics relate to various aspects of diversity, equity and inclusion within an organisation. This includes aspects such as workforce demographics, representation of underrepresented groups, pay equity, and promotion rates across different demographic groups. Tracking these metrics and acting on the findings allows organisations to demonstrate their commitment to diversity and inclusion to employees, customers, investors, and the wider community.
By collecting and analysing DEI metrics, HR professionals can gain valuable insights into the composition of their workforce and identify any disparities or areas for improvement. This data can be used to develop targeted strategies and initiatives to promote diversity and inclusion, such as implementing bias-free recruitment processes, and providing diversity training programs, helping to build a diverse and inclusive workplace.
14. Overtime
Overtime is the additional time worked by employees beyond their regularly scheduled shifts, and is often related to workload demands, deadlines and unexpected circumstances. The amount of overtime worked during a particular period provides insights into staffing levels and productivity, making it an important HR metric to ensure operational efficiency.
Excessive overtime can indicate understaffing, inefficiencies in workflow processes, or poor resource allocation. Failure to address high levels of overtime worked can lead to lower employee satisfaction, a greater risk of burnout, and higher staff turnover rates. Redistributing workloads, hiring additional staff or improving workflow processes can help to mitigate the need for overtime and promote a healthier work-life balance for employees.
15. ROI of HR software
ROI of HR software measures the financial benefits offered by implementing HR software, typically expressed as a percentage. It’s calculated by dividing the money saved during a specific period by the cost of the software for that same period. This metric could include cost savings, increased productivity, and reduction in errors.
Tracking the ROI helps to demonstrate the value of investing in technology solutions to stakeholders. If existing HR software is found not to be cost effective, the organisation can explore alternative solutions to optimise budget and increase operational efficiency. For businesses that don’t already have a solution in place, implementing HR software is a great option to start streamlining HR processes.
To see how the right HR software solution can lead your business to success, sign up for a 14 day free trial today.
HR metrics FAQs
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Why are HR metrics important?
HR metrics help organisations to keep track of the important factors that impact productivity, satisfaction and profitability in the workplace. As well as allowing them to benchmark key performance indicators against industry HR trends, these metrics help HR professionals to better plan future hiring, engagement and retention strategies to create a stable and positive working environment.
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What’s the difference between a HR metric and a HR KPI?
An HR metric provides information on various HR activities, such as turnover rate and training expenses per employee. They’re primarily used to monitor and analyse HR performance over time.
Unlike general HR metrics, HR KPIs (or key performance indicators) are directly linked to strategic business objectives. Rather than giving a broad range of data about the workforce as a whole, they measure how effectively certain HR processes contribute to specific organisational goals.
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How do I use HR metrics?
While it’s important to gather valuable HR metrics like the ones we’ve looked at above, there’s no benefit to doing this unless you use the data to inform future decisions. From helping to optimise budgets to improving staff turnover rates and boosting employee morale, there are lots of ways to learn from HR metrics and implement new strategies to lead your business to greater success.
