What are HR metrics?
HR metrics are performance indicators that human resources (HR) departments use to assess the effectiveness of tasks like hiring, training and retaining staff. HR teams track these metrics to identify ways to improve the employee experience and reduce employee costs.
There are different categories of HR metrics, organised by the type of topics and tasks they address. They include:
recruitment
training and performance
engagement and retention.
Why is it important to measure HR metrics?
Monitor company health
Keeping an eye on HR key performance indicators (KPIs) provides insight into the overall health of your company’s performance. You can track employee and customer data to learn more about the effectiveness of your processes, both on employee engagement and revenue.
Decrease compliance risks
There are strict employment laws and regulations in place regarding minimum wage, overtime, tax exemptions, payroll statuses and more. Many of these regulations require ongoing documentation to maintain compliance, and tracking HR metrics is part of that compliance.
Measure progress over time
Consistently monitoring KPIs over time can help you assess progress in essential business performance areas, including revenue, employee cost, employee turnover and retention rates. Measuring progress ensures that your business is on the right track.
Improve ROI
Finding ways to increase your return on investment (ROI) can help you implement new programs to engage employees, boosting satisfaction and retention. In many cases, improving ROI reduces the overall cost per employee.
Ensure employees feel valued
Employee management is a critical component of HR work, and tracking employee satisfaction and retention rates helps you ensure that your employee engagement programs are effective. If your employees feel valued, the data will show it.
How to use HR metrics effectively
HR metrics are like any other type of data, and they’re only helpful if you know how to interpret them. Start by deciding which metrics you'll track and why they are essential. Here are some other tips you might find helpful:
Track the right metrics that align with your current business goals.
Interpret data with context, considering factors that could influence performance results.
Update the metrics you track based on your existing business goals or concerns.
If you know you want to lower your overall employee cost, for example, you’ll probably want to track the metrics associated with that cost. These metrics may include:
employee cost
training cost per employee
cost per hire
overtime percentage
healthcare costs per employee
employee turnover rate.
Cost metrics like these can help you assess how much it costs to hire, train and retain employees. Using this information, you can troubleshoot. A high turnover rate, for instance, will result in higher training and hiring costs, so investing more in your team members could lower employee costs.
23 key HR metrics (and how to calculate them)
Recruitment metrics
1. Time to hire
Time to hire measures how long HR takes to fill a job posting. This metric can help you assess the speed and efficacy of hiring processes and recruiting services. You can calculate the time to hire for your entire organisation or individual departments.
Sum of time it took to fill all positions / Number of filled positions = Time to hire
2. Acceptance rate
Acceptance rate is the percentage of applicants who accept a job after your team extends an offer. It can help you assess how desirable the job offer is and how well your hiring team is “selling” the position.
Number of accepted job offers / Total number of job offers = Acceptance rate
3. Ghost rate
The ghost rate tells you the number of new hires who don't show up for work on their first day. High ghost rates may indicate difficulty in recruiting or selecting high-intent applicants.
Number of new hires who didn’t show up on the first day / Total number of new hires = Ghost rate
4. Cost per hire
Cost per hire is the average cost companies incur when hiring new employees, including the costs associated with recruiters, job posting sites and applicant tracking software (ATS). Many businesses seek to reduce costs per hire while maintaining high applicant quality.
(Total internal recruiting costs over a set period + Total external recruiting costs over a set period) / Number of hires made during a set period = Cost per hire
5. Time to productivity
Time to productivity measures how long it takes between an employee’s start date and the point where they reach a standard employee productivity level. This metric can help you assess training and onboarding program efficacy, as well as the quality of your new hires.
First, set standard KPIs for employee performance and calculate the time it takes employees to reach them. Then, use this formula to calculate time to productivity:
Total sum of time it takes for employees to reach desired productivity / Number of new employees = Time to productivity
6. Early turnover rate
Early turnover is the percentage of employees that leave within their first year of employment at the company. It can indicate either a poor onboarding and training process or that your team isn’t finding the right applicants.
Number of hires leaving within one year of employment / Total number of new hires = Early turnover rate
Training and performance metrics
7. Training participation rate
The training participation rate indicates how many employees participated in a specific training program. This metric can help you assess how engaged employees are or which managers successfully encourage ongoing training.
Number of employees participating in a training program / Total number of employees = Training participation rate
8. Training completion rate
The training completion rate assesses how many employees complete a specific training program. It can help determine whether your employees find your training programs engaging and valuable.
A company may measure training completion rates by counting the number of employees who start a specific training program or by counting the total number of employees. In most cases, companies measure based on the total number of employees the training is relevant to.
Number of employees who completed the training program / Total number of applicable employees = Training completion rate
9. Training cost per employee
Training cost per employee assesses how much it costs on average to train each employee. Costs include training and education programs, conference fees, travel expenses and a company’s learning management system.
Sum of costs associated with employee training / Total number of employees = Training cost per employee
10. Training ROI
Training ROI assesses whether the company’s training programs provide a positive impact on revenue compared to the costs associated with the training programs themselves.
(Value of increased performance - Cost of employee training) / Cost of employee training x 100 = Training ROI
11. Average performance rating
The average performance rating tracks the mean performance rating for all employees or employees in specific departments. This metric can help HR track whether training is effective at increasing performance.
(Sum of all performance ratings / Number of employees) x 100 = Average performance rating
12. Revenue per employee
Revenue per employee calculates how much revenue each employee generates on average. Companies with higher revenue per employee are utilising their teams most effectively.
Total amount of revenue generated in a set period / Total number of full-time employees on staff during the set period = Revenue per employee
Compensation metrics
13. Full-time equivalent employees
The full-time equivalent employees metric tells you how many “full-time equivalent” (FTE) employees are on staff. It’s essential to note this isn’t a headcount — headcounts tally the number of people in a company, while FTEs measure the work the company pays for regardless of headcount.
In most countries, compliance with this measurement is essential, and calculations vary depending on what is considered full-time. To calculate total FTE, you can use the following formula:
Number of employee's scheduled hours / business hours for a full-time work week = Total FTE
14. Billable hours per employee
In some jobs, employees must submit billable hours to clients. Using the billable hours per employee metric, HR can assess how much an employee is earning compared to how much revenue they're generating.
Total number of billable hours / Total number of employees = Billable hours per employee
15. Pay equity / pay gaps
Employee pay equity metrics ensure fair compensation. Pay equity calculations examine differences in pay between different workforce segments, like gender or race. Laws regarding pay equity, particularly between genders, are common in most countries.
A pay gap can be adjusted or unadjusted. The unadjusted pay gap measures the difference between different workforce segments (such as men and women), while the adjusted pay gap accounts for factors like education and experience. Usually, companies look at the unadjusted metric, where significant gaps indicate inequality.
You can calculate the gender pay gap as follows:
100% x (Average male total remuneration – Average female total remuneration) / Average male total remuneration
16. Overtime percentage
The overtime percentage indicates how much of your payroll goes to overtime. It can help you determine if you have enough employees on staff and whether managers are sticking to appropriate schedules.
(Overtime pay amount / Total payroll) x 100 = Overtime percentage
17. Benefit participation rate
The benefit participation rate is the percentage of employees participating in a particular benefit plan. HR staff can use this metric to assess the perceived value of different programs or identify underutilised programs that need additional promotion.
(Number of employees enrolled / Number of employees eligible) x 100 = Benefit participation rate
Engagement and retention metrics
18. Absenteeism
Absenteeism is your employee absence rate, detailing the number of missed workdays compared to scheduled workdays. High absence rates may indicate low job satisfaction.
(Missed workdays / Total scheduled workdays) x 100 = Absence rate
19. Engagement rate
The engagement rate measures employee enthusiasm and involvement at work. A higher engagement rate typically correlates with increased productivity and lower turnover. While there's no standard formula, regular employee surveys and feedback tools can provide insights into this metric.
To measure: Use regular employee surveys and analyse feedback.
20. Employee satisfaction index
Employee Satisfaction Index (ESI) measures employee satisfaction with their workplace, including salary, managers and growth opportunities. You can calculate ESI by asking employees to answer survey questions on a scale of 0–10 and then applying their scores to a formula. Higher scores indicate greater satisfaction. While there are several methods to calculate ESI, the simplest formula is:
(Sum of all employees’ scores / Maximum possible score) x 100 = ESI
21. Retention rate
Retention rate is the percentage of employees that stay with your company within a set period. Your goal is to maximise the return on your training and hiring costs.
(Number of employees who stay during a set period / Total number of employees at the start of the set period) x 100 = Retention rate
22. Employee turnover rate
Employee turnover rate tells you how many employees leave the company during a set period. You want to minimise your turnover rate to retain top talent longer. First, you’ll need to calculate your average number of employees with the following formula:
(Number of employees at the beginning of a set period + number of employees at the end) / 2 = Average number of employees
Then, use your average number of employees to calculate your turnover rate.
(Number of employees who left during the set period / Average number of employees) x 100 = Employee turnover rate
23. Voluntary employee turnover rate
The voluntary turnover rate indicates the number of employees who quit independently during a set period. High voluntary turnover often indicates poor job satisfaction, and you may need to reconsider compensation and training packages.
(Number of employees who voluntarily quit in a set period / Total number of employees in the same period) x 100 = Voluntary employee turnover rate
Effective HR management with MYOB
When it comes to effectively managing your employees and tracking HR performance metrics, MYOB has you covered.
MYOB’s cloud-based business management software allows you to build out the employee management system that’s right for your business, from payroll to full-scale workforce management.
Pay for what you need, when you need it. MYOB’s integrated workflows allows your business and HR function to scale with your business as you need it, future-proofing your HR capabilities.
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