HR Expense per Employee

HR Expense per Employee

KPI Details

Human Resources (HR) Expense per Employee measures HR spending on a per employee basis (i.e., average cost per employee). A relatively high value for this metric (i.e., higher than the average or median benchmark) may be related to ineffective recruiting processes, high employee turnover rates (which, in turn, increase recruiting, hiring and training costs), highly manual HR processes, and/or a general lack of discipline and productivity within HR operations. While a relatively low value for this metric is preferred, this should also be balanced with the risk inherent in managing human capital, the effectiveness of employee training programs, and the overall level of service being provided to the company's employees. Poor HR performance may shed negative light on the company's human capital management practices, and can adversely impact employee satisfaction and turnover rates.

KPI Definition

The total expense incurred by the Human Resources (HR) Department expense divided by the total number of employees working for the organization over the same period of time. Total HR expense includes labor, technology and other overhead costs related to recruiting, hiring, employee relations, compensation and benefits management/administration, payroll processing, training and development, and strategic human capital management operations.

KPI Best Practices

• Invest in recruiting to acquire high-quality new hires and reduce turnover costs
• Promote employees from within the company
• Investigate employee complaints right away to avoid escalation and employee dissatisfaction
• Utilize webinars and eLearning to minimize need for costly in-person training

KPI Calculation Instructions HR Expense per Employee?

Two values are used to calculate this KPI: (1) total Human Resources (HR) expense incurred, and (2) the total number of employees working for the company over the same time period. Total HR expense should include labor, technology (e.g., HR management systems, etc.) and other overhead costs related to recruiting, hiring, employee relations, compensation and benefits management/administration, payroll processing, training and development, and strategic human capital management operations. When measuring this value for an extended time period (quarterly or annually), use the average number of employees working for the company during that time period (i.e., number of employees at end of each month divided by the number of months in the measurement period).

KPI Formula :

Total Human Resources Expense / Total Number of Employees