HR metrics use the power of data to quantify the costs and measure the success of HR processes and initiatives. Since HR decisions directly impact your employees and, thus, your startup as a whole, leveraging data is a powerful way to make informed decisions about when to keep current practices in place and when to pivot.
You can jump to our infographic to learn how eight of the world’s top companies are leveraging HR data, or keep reading to learn about 22 common HR metrics your startup should be using and how to calculate them:
Compensation HR Metrics
The most common reason startups fail is because they run out of cash. Therefore, having accurate metrics to track employee costs is vital to success (especially since additional costs like overtime, bonuses, and benefits can really add up).
Knowing the true cost of an employee also helps you evaluate what you’re willing to pay for certain positions and whether or not to keep an underperforming employee.
Here are some important compensation metrics.
1. Compensation Revenue Ratio
Paying your employees a great wage is something every employer should aspire to do, but in order to keep a profitable business, you need to be aware of your compensation revenue ratio. This is the amount you are paying your employees compared to the amount of money being generated by your company.
How to calculate: Compensation ÷ revenue
2. Benefit Costs
Having a robust benefits package is a great way to retain top talent. Keeping track of the actual cost per year of your benefit program will allow you to shop the market more accurately and track employees total cost.
How to calculate: Total cost of employee benefit program ÷ the total number of employees
3. Overtime Spend
Analyzing your overtime spend will give you insight into when it’s time to hire new employees. It can also give you perspective on the current state of your company culture. For example, if everyone is regularly working overtime, there’s a good chance they don’t feel a strong work/life balance.
How to calculate: Total cost of employee overtime ÷ the total number of employees
4. Variable Pay as Percent of Salary
In addition to compensation, a lot of times companies reward employees with commission and bonuses. This variable pay is a huge motivating factor for employees to perform better. It is also a great added bonus during the hiring process for recruits, as it means they have an opportunity to make more money than the salary offer.
How to calculate: Annual variable pay cost ÷ annual salary
5. Worker’s Compensation Incidence Rate
Sometimes, workers comp is a complete accident. Other times, it can reveal safety problems that can cost your company money and employees. Track how often workers’ compensation incidents are appearing annually to make sure you’re operating a safe work environment for employees.
How to calculate: Number of injuries per 100 full-time employees ÷ total hours worked by all employees during the calendar year x 200,000
Employee turnover can cost you big, so streamlining your recruitment process to find effective employees who intend to stay for the long term is essential.
A study by company review website Glassdoor revealed it takes an average of 52 days to fill an open position and that U.S. companies spend $4,000 on average to fill it.
Here are some essential metrics to ensure you have a grasp on your recruitment costs.
6. Cost per Hire
Your cost per hire is the average amount of money spent on hiring a new employee. This metric is important to consider when you set your recruiting budget for the year.
How to calculate: Recruitment costs ÷ (compensation cost + benefits cost)
7. Time per Hire
In the business world, time is money. Most companies prefer a shorter recruitment process because that means your HR team has streamlined the process. It also helps prevent productivity loss by filling gaps faster.
How to calculate: Total days taken to fill a job ÷ number hired
8. Job Referral Investment
Your job referral percentage can reveal a lot about what your current employees think of your company. After all, employees are likely to refer friends and family if they think it’s a positive work environment!
Job referrals are also a great way to hire talent as 82% of employers rate job referrals as the best return on investment for recruiting. Typically, employers offer a referral bonus for employees so you’ll want to calculate that as well.
How to calculate: The return of your employee referral program ÷ the cost of it
9. New Hire Failure Rate
Turnover among new hires is pretty common. A report in Forbes revealed that 20% of new employees leave within their first 45 days of employment. There are many reasons why new hires leave but keeping track of the data will help you improve your onboarding process in the future.
How to calculate: Total # of employees who leave after 90 days ÷ total number of employees who left
10. Diversity Hires in Customer-Facing Positions
According to Glassdoor, 67% of employees want to join a diverse team. You also want to make sure that diversity hires are also in customer-facing positions, as this will help with recruitment and future sales.
How to calculate: Total # of diversity hires for customer-facing positions divided by total number of hires
11. Yield ratio
How much time are your recruiters wasting speaking to candidates that don’t fit the bill? Track your yield ratio to see what percentage of people interviewed make it to the next round with your yield ratio.
How to calculate: Percent of applicants that make it to the next round ÷ total number of applicants interviewed
Often times, companies pay extra for their training and development activities, and for good reason. Seven in 10 employees say that training and development opportunities influences their decision to stay in a role.
Here are some of the best ways to track the success of those programs.
12. Cost of Training and Development Activities
Having your HR department handle training and development activities is a great way to streamline employee growth. Here’s how to track the cost of the programs.
How to calculate: Total cost of program ÷ number of activities offered
13. Training Efficiency
There’s no use wasting money on training costs if they are not effective for your employees. You’ll want to find your own way to measure training effectiveness based on a sample size of employees, such as 25% of your staff.
How to calculate: Training expenses per employee ÷ training effectiveness
14. Performance Goal Success Rate
Performance goals are a great way to track employee performance and let them be involved in their growth process. You’ll want to track the percent of goals your employees accomplish to locate standout workers.
How to calculate: Total # of performance goals met or exceeded ÷ total # of performance goals
15. Wellness Utilization Percent
Investing in employee health and wellness is a sign of a great employer. Ensure your HR department tracks how many people take advantage of these benefits.
How to calculate: Total number of employees utilizing a wellness program ÷ total number of employees
You can learn a lot about your company’s culture by taking a deeper look into your retention rate. Keeping top talent is the #1 concern of CEOs. If your startup has a culture problem, you’re likely to lose your top performers pretty quickly.
Try these quick calculations to determine if you’re retaining employees effectively.
16. Employee Turnover Cost
In addition to tracking the rate at which employees are leaving, it’s also important to track the cost to your company. This is a great way to develop additional processes to boost employee satisfaction.
How to calculate: Total costs of separation + vacancy + replacement + training
17. Employee Turnover Rate
A high employee turnover rate reveals a lot about your company culture. Keep track of how often employees are leaving and which departments they are leaving from.
How to calculate: Number of employees exiting the job during 12 month period ÷ average number of employees during the same period
18. Length of Employment
You know you are doing something right if employees stick around. Having great retention rates is a great sign of positive company culture.
How to calculate: Total # of years of service of all employees ÷ the number of employees
In addition to compensation, recruitment, and training and development, here are some additional popular HR metrics to take into consideration:
19. Absence Rate
Your absence rate can reveal underlying employee morale problems. For example, companies that have more overtime tend to have increased absenteeism due to burnout. It can also reveal problems in your recruitment process if you aren’t hiring reliable employees.
How to calculate: Total number of absence days ÷ workdays
20. Cost of HR per Employee
Keep track of how much you are spending on your HR department per employee to make sure you are investing enough into human resources.
How to calculate: Total salary + benefits package of HR team ÷ total number of employees
21. Employee Satisfaction
Whether you realize it or not, your employee satisfaction rate affects most other key HR metrics. For example, dissatisfied employees can affect employee turnover rate, training effectiveness, team productivity, and more. Send out regular anonymous employee surveys to gauge satisfaction.
How to calculate: Positive company survey reviews ÷ total number of survey reviews
22. Empathy Index
A recent survey revealed that 60% of workers would take a pay cut to work for an empathetic company. Calculate your internal empathy index to determine whether your current workforce feels your company is leading in this area.
How to calculate: Number of employees who rate your company as empathetic ÷ total number of employees
What Are the Most Important HR Metrics?
In a perfect world your company would have the time, money, and resources to improve every area where your HR metrics fall short. However, unless you are a huge corporation, you may not have the capability to do it all. Every organization is built differently, so it’s important to invest your energy into the HR metrics that most closely align with your vision.
If you want to emphasize people analytics as a major part of your company culture, then placing extra emphasis on measuring employee satisfaction, retention, and training is necessary.
Sometimes, money is tight. This can be especially true when your startup is first launching or you are experiencing a period of strife. Here, compensation metrics will go a long way to help you track the true cost of every employee and the benefits and programs that you’re offering. You can compare these costs to other metrics such as employee performance to decide who to let go in the event of layoffs.
What are KPIs for HR?
In HR, key performance indicators (KPIs), otherwise known as HR metrics, are strategic analytics that allow you to measure the success of your HR initiatives and programs. It’s not enough to implement HR practices you believe will be successful. Instead, you need to prove that they work in order to have an actionable HR strategy.
Having insight into your company’s HR successes and problem areas will allow you to change course when needed. It will also help you devise a budget for your HR department, which can impact how many HR employees you have, what technology your HR department can utilize, and more.