When it comes to Human Resources (HR) strategies, it is recommended to track specific measurables. By tracking statistics such as employee retention rates and turnover cost, you have a way to measure the effectiveness of HR initiatives such as a formal on-boarding program or health benefits.

And yet, many companies don’t always have the time to track and analyze decisions around recruiting, hiring, interviewing, and retention.

By using just a few simple, intentional HR data points you will gain insight on the return on investment (ROI) of HR initiatives.

The sections outlined on our navigation bar provide more information about HR ROI calculations including why HR metrics matter, how to track HR data, how to use results strategically, and data management options.

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Why Your HR Department Needs Metrics

HR metrics are sometimes overlooked by small businesses who assume they are too complicated or too time-consuming to deal with.

However, HR metrics will help you uncover strengths and weaknesses within a company and give you management tools to understand which areas need improvement.

Why HR Metrics MatterWhy_HR_department_needs_metrics

HR metrics help your businesses:

  • Get a pulse on the health and stability of your workforce

  • Understand if HR initiatives are working

  • Make informed HR decisions to recruit and retain the best staff

  • Spend HR dollars wiser

  • Set a foundation for long-term growth

HR Metrics to Track

Here are ten HR data points any business can track that will give strategic insights to HR trends, costs, efficiencies, productivity, and success.

1. Employee Retention Rate

Employee turnover is expensive. Track your employee retention rate to understand how your employee retention strategies are working, and to gauge company morale.

2. Cost of Employee Turnover

Knowing and tracking the cost of losing an employee will help you make more strategic decisions about benefits and retention activities.

3. Current and Historical Compensation Data

Track compensation data to ensure minimum wage and overtime pay compliance, and to understand employee growth within the company.

4. Training and Onboarding Expenses

Calculating your new employee training and onboarding expenses helps you understand your cost to hire, and are important for budgeting.

5. Recruiting Expenses

Calculating your recruiting expenses helps you understand your cost to hire, and are also important for budgeting.

6. Employee Happiness

Employee happiness data, such as employee surveys, are an important indicator of morale and company culture.

7. Absence Rate

Employee absence rate is a simple measurement that helps you understand how many days employees are missing, and can be an indicator of employee satisfaction.

8. Revenue Per Employee

Revenue per employee helps you uncover just how much each employees is actually earning for your company.

9. Benefit & Perks Expenses

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

10. 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.

In the next section on how to track HR data, specific calculations will be discussed.

How to Track Your HR Data

Tracking HR data helps any small business make data-driven decisions about recruiting, hiring,

How_to_track_HR_data

onboarding, retention, and HR policy. This section covers how to calculate specific HR ROI measurements, and tips for how to track HR data.

HR ROI Data Calculations

This section covers how to calculate eleven key HR data calculations.

Calculating Employee Retention Rate

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

Sample Inputs

Sample Calculation

Period of Time: Fourth Quarter


Total Employees at Beginning of Q4:24


Total Employees Terminated in Q4: 4

24 – 4 = 20


20 / 24 = .83


.83 x 100 = 83%

Standard employee retention rates are anywhere from 70% - 85% but vary greatly by industry and calculation method (for example, are you measuring only voluntary turnover or all terminated employees?).

Calculating 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 (highest for hard-to-replace, high earning CEOs)

Now, calculate costs of employee turnover for a period. In the example below, the company has 24 employees (EEs) and had four employees leave during Q4.

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 Engagement

  • Hiring and Recruiting Costs

  • Orientation and Training Costs

  • Cultural Impact

Calculating 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 helpful to your workforce

You can track this information in a spreadsheet, or use HR Software.

Calculating Training and Onboarding Expenses

To calculate training and onboarding expenses, include the following:

  • Personnel Time (time spent to train, prepare, etc.)

  • Training Materials/Supplies

  • Meeting Space

  • Social Activities

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

Calculating Recruiting Expenses

To calculate training and onboarding expenses, include the following:

  • Advertising

  • Recruiting Software

  • Networking

  • Personnel Time (time spent screening, interviewing, etc.)

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

Calculating Employee Happiness

An easy way to measure employee happiness is with a simple employee survey. Free survey tools are available online, or you can use a printed survey or more sophisticated survey software.

When creating a survey, keep it simple. Include a few targeted questions about happiness, culture, growth, pay, advancement, etc. Use a number scale so results are clearly quantifiable, and only ask about metrics that matter to your business. Survey employees monthly to calculate happiness over time.

Calculating Absence Rate

Absenteeism is defined as employees missing work due to personal illness, personal time off, or

other reasons (usually excluding paid vacation). These absences may be avoidable or unavoidable. Employee absence rate is a simple measurement that helps you understand how many days employees are missing.

Absence Rate = Workdays Lost Due to Absence ÷ ( Average Employee Population x Number of Work Days Available per Employee )

Calculating Revenue Per Employee

Revenue per employee measures the average revenue generated by each employee of a company.

Revenue per employee is calculated by dividing a company’s revenue by its total number of workers (Revenue ÷ Number of Employees).

Calculating Benefit & Perks Expenses

Each company has a unique package of benefits and perks. To calculate benefit and perks expenses, include the following, as applicable:

  • Benefits (ex: company contributions to health insurance, retirement, or life insurance)

  • Administrative costs

  • Supplies (ex: meals provided, party supplies, etc.)

  • Cell phones

  • Tuition reimbursement

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

Tip: Many of these benefit expenses can be offered as a tax-free fringe benefit.

Calculating 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.

Calculating Return on Investment (ROI)

In this guide on HR metrics, we often discuss ROI. What is ROI?

ROI is a performance measure used to evaluate the efficiency of an investment. 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 HR Data

HR metrics don’t need to be complicated. Instead, they should be simple, clear, and connected to your company’s goals and priorities. Here are six tips for tracking HR data as you consider which data points matter to your business.

1. Know Why HR Metrics Matter

As you collect and track HR data, keep in mind why you’re collecting the data and why it’s important. If the data is not clearly connected to a business priority, don’t spend the time tracking or analyzing it.

2. Keep It Simple

As mentioned previously, HR metrics don’t need to be overly complicated. If the metric is not simple, clear, and easily gathered and calculated, it likely will not be used. Track and collect simple, straight forward information that will provide useful insights to your HR and business objectives.

3. Identify How You Will Track Data

From spreadsheets to comprehensive Human Resource Management Systems, there are a variety of tools available to track HR data. An important step is to identify which data you will collect, and how. Read more about data management options here.

4. Know Your Audience

As you collect HR data, some information will be more insightful to HR and some information will be more insightful to the owner or CFO. As you present information, keep in mind the metrics that matter most to your audience.

5. Connect HR Metrics to Business Objectives

The most powerful and useful HR data connects HR metrics to business objectives.

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. Share it with your leadership team. Create actionable next steps.

How to Use Your Results

When it comes to HR ROI calculations, the goal is to use the information to make smarter HR decisions, to spend company money wiser, and to create a healthy and productive workplace.

 

HR Data That Leads to Action

Data without analysis and action is just… data. As you collect HR data, don’t just file it away. 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 optimization. Learn about what is working, and not working. Then, make changes based on these learnings.

  • Communicate learnings and recommendations to key decision makers.

Using Your Results - A Step-by-Step Checklist

As you collect, analyze, and take action on your results, follow this step-by-step checklist:

  • Identify which data to track. Remember, choose HR data related to business objectives and ROI calculations that will provide actionable insights

  • Identify how and who will track the data. Remember, aim for consistent and comprehensive data. This may mean getting supervisors and managers onboard to help with data reporting. You also need to consider how the data will be tracked. Read more about HR data management options here.

  • Identify how the data will be analyzed. What is the sample size needed? What time frame will data be analyzed (ex: monthly, quarterly).

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.

Common systems to track HR data include spreadsheets, HR software, and human resource management system (HRMS).HR_data_management_options

Spreadsheets

Use Excel or another spreadsheet program to track your HR data points.

  • Pros - Easy and inexpensive to set up.

  • Cons - Manual entry and maintenance required, time consuming to maintain accurately.

HR Software

There are numerous HR software solutions on the market to help with employee management, hiring, personnel, benefits, and compliance administration.

  • Pros - A variety of options and features available. Cloud-based options available which are easy to setup and use. Makes data collection and reporting more automated.

  • Cons - Administrative fees required, but vary by type of software and vendor. Some businesses find limitations with customizing HR software.

Comprehensive Human resource management system (HRMS)

A Human Resource Management System (HRMS), also known as Human Resource Information System (HRIS), is a comprehensive system to store and analyze HR data, as well as track applicant tracking, performance management, attendance, compensation and benefits management, workforce analyses, and scheduling.

  • Pros - Minimizes errors (more automatic, less manual), and allows for employee self-service.

  • Cons - The most expensive administration costs, and not always worth the cost (or administration time) for small and medium sized businesses.

Considering the pros and cons of these HR data management, most small and growing companies go with an HR software system (or systems).

Additional Reading on HR ROI

How to Calculate HR Employee Retention Rates

When it comes to employee retention strategies, it is recommended that HR departments track specific measurables. By tracking statistics such as employee retention rates and turnover cost, you have a way to measure the effectiveness of new HR initiatives such as a formal on-boarding program or starting to offer health benefits. Read more.

Employee Retention - The Real Cost of Losing an Employee

For businesses to thrive in today’s economy, finding and retaining the best employees is important. This is especially true for small businesses and nonprofits competing with larger businesses, and larger budgets, for top talent. So, what is the real cost of losing an employee? Read more.

FAQ - How Do I Calculate the Number of Full Time Equivalent (FTE) Employees?

A common question from employers, health insurance brokers, and CPAs is "how do you calculate the number of full time equivalent (FTE) employees?" Read more.

Why All Small Businesses Should Track HR Data (But Don't)

In this article, we tackle the importance of tracking HR data and summarize five key data points all small business human resources should track. Read more.

How to Calculate the ROI on Defined Contribution Health Benefits

Health benefits are the number one fringe benefit offered by employers, and are an important part of employee recruiting and retention strategies. Many employers look at health benefits as an investment in employees. And just like traditional health benefits, companies who implement defined contribution health benefits are looking to quantify their return on investment (ROI). Read more.

The Comprehensive Guide to the Small Business HRA