Human resources KPIs are becoming increasingly important as businesses compete for top talent in a war-like atmosphere. HR professionals need to be able to measure and track employee engagement, attrition rates, and other key performance metrics in order to identify issues before they become bigger problems.
The next generation of workers, Gen Z, is already entering the workforce, so HR departments must also begin preparing now to attract and retain this new cohort of employees who are more demanding and bringing new challenges to HR management.
Further Read: Ultimate Guide on KPIs – Incl. List of 200 KPIs for Businesses
What are Human Resources KPIs?
Human Resources KPIs, or key performance indicators, are a way to measure and track employee engagement, attrition rates, and other key performance metrics to identify issues before they become more significant problems. Measuring employee engagement is vital because it can show employees’ satisfaction with their work and the company. Tracking attrition rates can help identify why employees are leaving the company and what can be done to keep them from leaving the organization.
Additionally, measuring other HR-related data, like training participation or employee satisfaction, can help companies improve their workforce performance. While financial data is undoubtedly a vital part of HR KPIs, it is not the only factor that should be considered. By tracking data related to employee engagement, retention, and training participation, companies can get a more holistic view of their workforce performance and find ways to improve it.
Why is it essential to track Human Resources KPIs?
Successful HR management requires data-driven decision-making. The only way to make sound decisions about employee retention, engagement, and other vital issues is by gathering and analyzing data. By tracking Human Resources KPIs, companies can identify trends and problems before they become bigger issues. Additionally, data-driven HR management allows companies to compare their performance to their competitors, helping them stay ahead of the curve. Tracking a variety of HR KPIs is essential for successful HR management. Measuring employee engagement and attrition rates are just the beginning; companies must also track data related to training participation, employee satisfaction, and more. By gathering data from various sources and analyzing it thoroughly, businesses can make informed decisions about their workforce that will help them achieve their goals.
Overview of the most critical Human Resources KPIs
- Absenteeism rate
- ROI of outsourcing
- Succession planning rate
- Open/closed grievances
- Promotion rate
- Female to Male Ratio
- Average Time Stay
- Time to productivity
- Successor gap rate
- Worker composition by gender, experience, and tenure
- Internal mobility
- Manager quality index
- HR effectiveness
- Employee satisfaction rates
- Training ROI
- Gender Diversity By Role
- Part-Time Employees
- HR functional operating expense rate
- Labor cost per FTE
- Labor cost revenue percent
- Labor cost revenue expense percent
- Total benefits as a percentage of labor costs
- Overtime Hours
- Revenue per FTE
- Profit vs. compensation per FTE
- Human capital ROI
- HR functional cost per employee
- Cost per Hire
- Quality of hire
- Vacancy rate
- Turnover rate
- Turnover Rate By Group
- Training Cost per Hire
- Resignation/retirement rate
- External hire rate
- Diversity, experience, and gender hire ratio
- Recruiting funnel metrics
- Talent import/export ratio
- Voluntary turnover rate
- Retention rate
- Recruiting expense per new hire
- Retirement rate forecast
Explanation of 43 important Human Resources KPIs
Absenteeism rate is the percentage of employees who are not at work due to illness, personal reasons, or other causes. This metric can help companies identify problems with employee engagement or satisfaction. Additionally, tracking absenteeism rates can help companies identify patterns in employee absences, which can help them address any potential issues.
ROI of outsourcing
It is essential to manage HR to maintain a healthy organization. One way to do this is to outsource certain functions to an experienced third-party provider for cost savings while ensuring that their overall Human Resource needs are met across different departments. To measure the success of this outsourcing, it is advised to calculate the ROIs of all outsourcing projects regularly and reevaluate if positions are placed more permanently; therefore, insourcing makes more sense.
Succession planning rate
With the ever-changing workforce, businesses need to have a succession plan. This is especially true for companies in a high-demand industry or with many turnovers. A succession plan helps to ensure that there is always someone qualified and willing to step into a role when needed. Many factors go into succession planning, but one of the most important is the succession planning rate. This is the percentage of employees willing and able to take on a new role within the company. A high succession planning rate indicates that employees feel valued and supported by the company and believe there is an opportunity for advancement. This can be a key indicator of employee satisfaction and retention. Succession planning rates can vary from company to company but usually fall somewhere between 20-30%.
A grievance is any complaint that an employee raises about their working conditions. This could be anything from feeling underpaid to feeling harassed or discriminated against. Tracking the number of open grievances gives you a good idea of how many employees are unhappy with their current situation. Closing grievances is also important, as it shows that you’re taking action on employee concerns and trying to resolve them. By tracking both open and closed grievances, you can get a good sense of how your department is performing.
The promotion rate is the percentage of employees who are promoted each year. This metric can be used to measure employee satisfaction and retention, as well as to identify potential issues with the promotion process. A low promotion rate may indicate that employees feel stuck in their current roles or that there are not enough opportunities for advancement. A high promotion rate may indicate that the promotion process is not being managed effectively or that there are too many opportunities for advancement. The ideal promotion rate will vary from company to company, but a good rule of thumb is to promote at least 20% of employees each year.
The female-to-male ratio is the workforce’s percentage of women to men. This metric can be used to measure gender diversity in the workplace. A high female-to-male ratio indicates more women in the workforce than men and vice versa.
Average Time Stay
The average time stayed in position is the average length of time an employee stays in their current role. This metric can be used to measure employee satisfaction and retention and identify potential issues with the hiring process. A high average time stay in a position may indicate that employees feel stuck in their current roles or that there are not enough opportunities for advancement.
Time to Productivity
Time to productivity is the time it takes for an employee to become productive in their new role. This metric can be used to measure the effectiveness of the onboarding process. A high time to productivity indicates that employees are taking longer to become productive in their new roles. This could be due to several factors, such as unclear expectations or a lack of training.
Successor Gap Rate
A succession plan is essential for any business, but it’s vital for companies in a high-demand industry or with many turnovers. A succession plan helps to ensure that there is always someone qualified and willing to step into a role when needed. Many factors go into succession planning, but the successor gap rate is one of the most important. This is the percentage of employees who are not currently in a role but are willing and able to take on a new role within the company. A high successor gap rate indicates that there are not enough employees who are qualified and willing to take on a new role.
Worker composition by Gender, Experience, and Tenure
The worker composition by gender, experience, and tenure is the percentage of employees who are male, female, experienced, or inexperienced. This metric can be used to measure diversity in the workplace. For example, a high percentage of male employees may indicate that the company is not doing enough to attract and retain female talent.
Internal mobility Rate
The internal mobility rate is the percentage of employees who move to a new position within the company. This metric can be used to measure employee satisfaction and retention and identify potential issues with the promotion process. A low internal mobility rate may indicate that employees feel stuck in their current roles or that there are not enough opportunities for advancement.
Manager Quality Index
The manager quality index is a measure of the quality of managers in the company. This metric can be used to identify potential issues with the management team. A low manager quality index may indicate that managers are not doing enough to support their employees or that they are not providing adequate training and development opportunities.
Human Resources (HR) Effectiveness is a critical factor for organizational success. Achieving HR Effectiveness requires aligning human resources strategy with business strategy and the effective execution of people management practices. HR effectiveness can be measured by its ability to contribute to organizational performance by achieving two primary objectives: 1) Meeting or exceeding key business results and 2) Enhancing employee productivity, engagement, and commitment.
Employee satisfaction rates
Employee satisfaction rates are an essential measure of HR effectiveness. Satisfied employees are more productive and engaged in their work, which leads to better organizational performance. Achieving high employee satisfaction rates requires the implementation of people management practices that meet the needs of employees and align with the company’s business strategy.
The HR KPI of Training ROI is the percentage of return on investment in employee training and development. This metric measures how effective the training programs are in terms of improving employee productivity and overall organizational performance. HR professionals can use Training ROI to assess their training programs’ effectiveness and make necessary adjustments to improve performance.
Gender Diversity By Role
The role of gender in the workplace is a critical consideration for businesses. Understanding gender diversity by role, companies can develop policies and practices that support and enable all employees to reach their full potential. A good way to tackle these challenges is to develop a systematic approach to gender diversity by role.
Part-time employees are an essential part of any business, and they can provide several benefits. For one, they can help to increase productivity by filling in gaps in the workforce. In addition, they are more flexible, especially offering part-time jobs, which increases diversity by allowing more people to apply. This KPI might not be very significant, but a good indicator in combination with others.
HR functional operating expense rate
HR functional operating expense rate is a metric that measures how much is spent on HR per employee. The average functional operating expense rate for HR across all industries is approximately three percent. However, there can be significant variations in this number depending on the specific industry.
Labor cost per FTE
In order to calculate labor cost per FTE, you need to first determine how much is spent on HR per employee. This can be done by dividing the total HR functional operating expenses by the total number of employees. Once you have this number, you can then divide it by the number of full-time employees to get the labor cost per FTE.
Labor cost revenue percent
One standard measure of how HR costs impact a company’s bottom line is labor cost revenue percent. This metric shows how much of the company’s revenue is spent on employee salaries and benefits. It can be calculated by dividing total HR costs by revenue or labor costs by income. Take whichever calculation gives you the smaller number.
Labor cost revenue expense percent
There are three main categories that a company’s expenses fall into labor cost, revenue, and expense. Each of these categories can be further broken down into smaller categories. For example, labor costs can be divided into hourly wages and salaries. Revenue can be divided by product or service line. And so on. The way to think of these three categories is as percentages of each other. Labor cost as a percentage of revenue, revenue as a percentage of expense, and expense as a percentage of labor cost. This breakdown can be helpful in understanding where your company stands financially and where it could make cuts or improvements.
Total benefits as a percentage of labor costs
Total benefits as a percentage of total labor costs can be used to measure how efficient a company is in terms of its benefits program. Ideally, total benefits would be less than total labor costs, indicating that the company is spending less on benefits than it is paying out in wages. However, if the percentage is high, it could suggest that the company is not as efficient with its benefits program as it could be and may be spending more than it needs to. By tracking this metric, a company can identify areas where it could save money on benefits.
While this may seem like an unconventional choice, there are actually several advantages to using overtime as a KPI. First, it can help you identify employees who are working excessive hours and may be at risk of burnout. Additionally, it can give you insight into which departments or teams are consistently putting in extra work. Finally, tracking overtime hours can help you to make more informed decisions about staffing levels and budgeting. While some challenges are associated with using overtime as a KPI, overall, it can be a valuable tool for measuring employee productivity.
Revenue per FTE
Revenue per FTE (full-time equivalent) is a metric businesses use to measure their productivity. It can also be used as a benchmark for HR departments to identify overstaffing or understaffing problems. Generally, the higher the revenue per FTE, the more productive a company is.
Profit vs. compensation per FTE
Profit vs. compensation per FTE is another metric businesses can use to measure their productivity. This ratio compares a company’s profit to the amount it spends on employee compensation. A high ratio indicates that the company is profitable and/or has a low overhead cost.
Human capital ROI
When calculating human capital ROI, it’s important to look at the big picture and compare profit against Total Cost of Workforce (TCOW). This will give you a clear understanding of how efficiently your company is using its human capital. A high human capital ROI indicates that your company is profitable and is getting a good return on its investment in employees.
HR functional cost per employee
This metric is a good way to measure the efficiency of your HR department. To calculate it, simply divide the total cost of your HR department by the number of employees in your company. A low HR functional cost per employee indicates that your HR department is efficient and is not spending more than it needs to.
Cost per Hire
The cost per hire is a metric that businesses use to measure the efficiency of their recruiting process. To calculate it, simply divide the total cost of recruiting (including advertising, salaries, and other associated costs) by the number of new hires.
Quality of hire
The quality of hire is a metric that businesses use to measure the effectiveness of their recruiting process. To calculate it, you will need to survey new hires and ask them questions about their experience with the recruiting process. The higher the quality of hire, the more effective your recruiting process is.
The vacancy rate is a metric that businesses use to measure the effectiveness of their recruiting process. To calculate it, simply divide the number of vacant positions by the total number of positions in your company. A high vacancy rate indicates that your company is not filling its positions quickly enough and may need to improve its recruiting process.
Employee Turnover rate
The employee turnover rate is a metric that businesses use to measure the effectiveness of their retention efforts. To calculate it, simply divide the number of employees who leave your company by the total number of employees. A high employee turnover rate indicates that your company is not retaining its employees and may need to improve its retention efforts.
Turnover Rate By Group
The turnover rate by group is a metric that businesses use to measure the effectiveness of their retention efforts. To calculate it, simply divide the number of employees in each group who leave your company by the total number of employees in each group. A high turnover rate by group indicates that your company is not retaining its employees and may need to improve its retention
Training Cost per Hire
To calculate the training cost per hire, you will need to divide the total cost of training by the number of new hires. This will give you a clear understanding of how much your company is spending on training its new employees.
The resignation/retirement rate is a metric that businesses use to measure the effectiveness of their retention efforts. To calculate it, simply divide the number of employees who resign or retire by the total number of employees. A high resignation/retirement rate indicates that your company is not retaining its employees and may need to improve its retention efforts.
External hire rate
The external hire rate is the percentage of employees who are not hired internally but are instead brought in from the outside. This number can be significant to companies looking to fill a position quickly, as it can indicate how long they might have to wait before they can find a qualified candidate. It can also be helpful for companies who are trying to gauge how competitive their job market is. A high external hire rate could mean that many candidates are looking for jobs, while a low external hire rate could mean the company has a more challenging time finding qualified applicants.
Time-to-fill is the number of days it takes to fill a position. This metric is vital for companies looking to improve their hiring process, as a shorter time-to-fill can indicate a more efficient process. It can also be helpful for companies who are trying to compare themselves to other organizations in their industry.
Diversity, experience, and gender hire ratio
The diversity, experience, and gender hire ratio is the percentage of hired employees who come from a minority group, have less than three years of experience, or are female (most cases). This number can be significant to companies looking to improve their diversity hiring efforts.
Recruiting funnel metrics
Recruiting funnel metrics can provide valuable insight into how well your recruiting process works. Some of the most common funnel metrics include the number of candidates who apply, the number of candidates who are interviewed, and the number of candidates who are hired.
Talent import/export ratio
The talent import/export ratio is a metric that can be used to assess the effectiveness of your recruiting process. This ratio measures the number of new hires sourced from outside of your company versus the number of employees who left your company to work for another organization.
Voluntary turnover rate
The voluntary turnover rate is the percentage of employees who leave their position voluntarily. This number can be helpful for companies looking to understand why their employees are leaving and whether or not they are at risk for losing more employees in the future.
The retention rate is the percentage of employees who stay with a company for more than one year. This number can be helpful for companies looking to understand how long their employees are visiting and whether or not they are at risk of losing them in the future.
Recruiting expense per new hire
The recruiting expense per new hire is the amount of money a company spends on recruiting each new employee. This number can be helpful for companies looking to understand how efficient their recruiting process is and whether or not they are spending too much money on recruitment.
Retirement rate forecast
The retirement rate forecast is the percentage of employees projected to retire within the next five years. This number can be helpful for companies looking to understand how their workforce will change in the future and what skills they will need to fill the gaps.