A guide to human resource metrics

Why your HR initiatives need performance metrics

HR metrics are important for effectively monitoring the success of your organization's people strategy and HR initiatives. They provide a clearer understanding of your organization's human resources efforts.

Small to medium-sized organizations may miss important human resources metrics because they find them too complex or time-consuming to monitor. They might not understand how important this type of data is. Sometimes, they can underestimate its benefits.

It's important to know which metrics to measure. After all, you can't improve what you don't track. This guide to tracking essential HR metrics will provide an overview of the most important 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
• Time to hire
• 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 since last promotion
• Effectiveness of your HR software
• Return on investment (ROI)
• Tips for tracking human resources metrics
• How to use your results
• Data management options when calculating HR ROI

Employee demographics

HR should monitor employee demographics and numbers to track headcount growth and diversity. It's also important to protect organizations from discrimination claims and follow the law.

Organizations with 100 or more employees must file an EEO-1 report annually to the Equal Employment Opportunity Commission (EEOC). This includes information such as race and gender. However, all employers should track this information.

Potential employee metrics include:

• The age of your workforce
• Education level
• Location (i.e., whether an employee is on-site, fully remote, or hybrid)
• How long your employees have been with your organization.

You can also gather information on disabilities and sexual orientation to support your workforce. But don't require employees to share this information.

One way to gather employee demographic information is by conducting an anonymous survey. You'll want to be transparent about how you will use the data to encourage participation.

Employee retention rate

You can track your employee retention rate to gauge the effectiveness of your retention strategies and evaluate employee morale. Combine this metric with your employee turnover rate and the average turnover costs to see how much your organization spends on replacing workers who leave your organization.

Tracking these overall recruitment metrics helps organizations make data-driven decisions on hiring, onboarding, retention, and HR policy.

Calculating your employee retention rate

It's easy to calculate your employee retention rate. Take the total number of employees you had at the start of a specific time frame. Then, subtract the number of employees who left during that same period. Then, divide that result by the initial total employee count. This will give you the percentage of employees who stayed with your organization.

Standard retention rates are anywhere from 70%-85% but vary by industry and calculation method. You can even break down your employee retention rate by company leadership, department, or manager. This is known as the retention rate per manager.

Cost of turnover

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

How to find your turnover rate

The example below shows a company with 24 employees. It had four workers leave during Q4.

According to the U.S. Bureau of Labor Statistics, the average total turnover in the U.S. was 3.4% in July 2024. The average voluntary turnover rate was 2.1%.

How to calculate the cost of employee turnover

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

GA Partners, which provides HR outsourcing and administrative services, presents a summary of the replacement costs you may face when replacing different levels of employees:

Of course, each company is unique. Some organizations have an easier time replacing an employee based on the job or location.

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

• Lost workforce productivity
• Lost engagement levels
• 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 needs to monitor pay data to ensure you meet minimum wage and overtime rules. This also helps you understand employee growth within the organization better. Additionally, knowing the average salaries other organizations offer for comparable positions can help you stay competitive in the industry. If you offer too little, your employees will leave for jobs with better pay.

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 base salary
• Current salary
• Additional wages, such as bonuses or tips
• Other wage information relevant to your current workforce

Recruiting expenses

Along with your training and onboarding costs, your recruiting expenses also contribute to your overall hiring costs. Use this information and your recruitment data to find out which job posting sites attract the best candidates for your company.

How to calculate recruiting expenses

To calculate training and onboarding expenses, include the following:

• Advertising costs
• Recruiting software fees
• Networking
• Personnel time (creating an engaging job description, time spent screening, managing the interview process, etc.)
• Any fees for posting an open position on job boards or social media platforms
• Any fees for screening programs

You can collect this data in a budgeting spreadsheet or flag it in accounting software for easy tracking and analysis.

Absenteeism is when employees miss work due to personal illness, personal time off, or other reasons that usually exclude pre-approved paid time off. You can measure this at your organization with an absence rate. This simple measurement gives you a clearer picture of how many days employees are missing from work.

A high absence rate can indicate employee dissatisfaction and disengagement, which can lead to turnover if left unchecked.

How to calculate your employee absence rate

To calculate your absence rate, you can use the equation below.

Benefit and perks metrics

Figuring out key metrics about your employee benefits can improve your budgeting and give you insight into how much your employees value their perks. Tracking benefits helps you find out what keeps employees happy and sticking around.

Offering competitive benefits is extremely important for attracting and retaining top talent for your organization. Providing perks to your workers can improve job satisfaction and employee happiness.

You must ensure your benefits budget per employee is high to recruit and retain workers, but it should also be realistic and affordable. At the same time, you don't want to contribute to benefits your employees see little value in. A low benefit participation rate will hurt your overall budget and can also reflect low employee satisfaction.

Calculate benefits and perks expenses

Each company has a unique set of benefits and perks. You should track how much you spend on your overall compensation package.

To calculate benefit and perks expenses, include the following:

• Benefit plan costs, such as contributions to health insurance premiums, employee stipends, tuition reimbursement, retirement, 401k matching, and more
• Any administrative costs associated with managing your benefits
• Software fees
• Supplies, such as free snacks, party supplies, and more
• Employer-provided cell phones

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

You can also measure benefits costs per employee in various ways. Each method produces different metrics that can help you assess the effectiveness of your compensation package.

To get your benefits costs per employee, divide the annual costs of your benefits by the average number of workers you employ. You can also calculate benefits as a percentage of overall pay. To do so, divide the total amount you spend on benefits annually by the total you spend on salaries and wages.

How to reduce benefits costs

If you have a high benefit cost per employee, you might be tempted to cut back on the benefits you offer. However, this can increase turnover and absenteeism if your workers seek new opportunities with better benefits.

You can send out an employee benefits survey to determine which benefits your employees value the most. If there are benefits 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) instead of traditional group health insurance.

An HRA allows you to reimburse your employees for their qualifying medical expenses. This includes out-of-pocket expenses and individual health insurance premiums, giving employees more freedom to use their benefits on the medical expenses they want.

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

Effectiveness of your HR software

If you utilize HR software at your organization, you'll want to measure its effectiveness often. For example, suppose you pay for software that provides online courses for your employees to learn new skills. In that case, you'll want to track how many employees use the software, how long they spend on the platform, and whether or not employees who use the software stay at your organization longer than those who don't.

Measuring the success of your HR software will show you what software helps your organization grow and which doesn't.

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, remember why you're collecting the data and why it's important to your organization. If you're not connecting the data to an organizational priority, don't spend 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 data-driven insights into your HR and organizational objectives.

3. Identify how you will track data

Many analytics tools are available to track HR data, from human resource management systems (HRIS) to human capital management (HCM) systems. An important step is to identify which data you will collect and why. Do you want to improve recruitment efficiency? Or are you trying to avoid workplace toxicity by creating a positive company culture? Once you know your why, you can figure out how to track the necessary data.

4. Know your audience

When you gather HR data, some details will be more helpful for HR, while others will be more relevant for company leadership and stakeholders such as the owner or CFO. Remember the valuable insights 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. But it's a continuous process, so don't just file it away each time you gather it. Analyze, learn from, and share it with your company leadership team. Then, create a strategic plan with actionable next steps to help you reach your business goals.

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; your data management system doesn't need to be overly complex. But it does need to be consistent, time-efficient, and scalable.