Why Are HR Metrics Important?
If your HR team isn’t measuring key HR Metrics, it’s difficult to truly quantify the impact your HR department has on your company (and we know you’re massively impactful!). Nor can you quantify if you’re working efficiently, improve the employee experience, or hire effectively.
Key HR Metrics Your Team Should be Measuring
According to SHRM, hiring is the top HR concern in 2021. With hiring challenges and candidate shortages, time-to-fill is more important to monitor than ever before.
What is Time-to-Fill?
Time-to-fill is the number of days between when a job request is approved and the day an offer is accepted by a candidate.
An employer’s time-to-fill is increasing fast with the candidate shortage, so if your time-to-fill is greater than 30 days, it may be time to change your hiring approach, revisit pay rates and benefits, or partner with a local staffing expert to fill your positions faster.
How to Calculate Average Time-to-Fill
Calculate your company’s average time-to-fill by adding all time-to-fill measurements for each position you filled in a given period (e.g. a year) and then divide by the number of roles. For example, if you hired for three roles, with 20, 30, and 40 days time-to-fill respectively, then your average time-to-fill is 20+30+40/3 = 30 days. This calculation should refer to the same time period.
Cost-per-hire is the measure of the cost-effectiveness as well as the efficiency of your recruiting process.
Having HR data on cost-per-hire allows you to identify areas for improvement, helps guide your recruiting budget, and allows you to create better quarterly and annual strategies based on your budget.
How to Calculate Cost-Per-Hire
The cost-per-hire formula is as follows:
(total internal recruiting costs + external recruiting costs) / (total # of hires in a given time frame). Time frames are usually a quarter or year.
3. Employee Turnover
Employee turnover is the rate at which employees leave your organization.
This HR Metric is important to every company. You always want to work on how to retain your best employees. The lower your employee turnover, the better for the organization, your output, and your HR budget. A huge factor for monitoring turnover is that a higher rate of turnover will lead to higher costs per employee. Read our case study on how to reduce turnover by 88%.
How to Calculate Employee Turnover
Here is a simple employee turnover formula:
Employee Turnover Rate = (total employee resignations/average number of employees)*100
Why is it Important to Calculate Employee Turnover?
If turnover is high, costs are high. It costs more to hire and train a new employee than retain existing employees. On average, a “healthy” employee turnover rate ranges between 10-15%. If your employee turnover is above this range, it’s time to put a KPI in place to improve this HR Metric.
Pro-Tip: Watch out for higher employee turnover rates during a specific period, especially within the first three months. You can also break down turnover by department or by manager to understand where you could offer more management training. Read more about how to reduce employee turnover rate here.
Absenteeism is unplanned leave or absence from work and often it is chronic.
This is a table stakes HR Metric to monitor, especially with teams working remotely. It’s important to differentiate that absenteeism is very different from other leaves of absence. Consistent absenteeism is disruptive to teams and erodes trust so it’s important to watch with remote teams, employee disengagement at a high, and already lean teams.
Here are 6 top interview questions to reduce absenteeism and vet applicants for dependability.
How to Calculate Absenteeism
Absenteeism Rate= (Number of unexcused leaves during the period/Total period)*100
5. Overtime Percentage
Overtime is the amount of excess hours employees work in addition to their expected hours worked.
With employee scarcity and the latest challenges of hiring, overtime is through the roof. Excessive overtime is often a cue for inefficiencies in staffing. Consistent overtime leads to both employee burnout and higher employee costs.
How to Calculate Overtime Percentage for HR Metrics
Employee Overtime Percentage = (Overtime pay amount/total payroll)*100
Why is it Important to Calculate Overtime Percentage?
Keeping track of your employee overtime percentage will help you and the management team understand how efficiently you are utilizing your full-time workforce. With tight deadlines, high production demands, extra safety regulations due to COVID-19, and a scarcity of job candidates, overtime can add up quickly.
If you’re paying out overtime, you need to know if it’s required to hit goals, or if there are inefficiencies in your staff. If you’re fully staffed and there is still high over time, consider training on time management or re-strategize internal processes.
6. Employee Retention
Employee Retention is the act of keeping employees gainfully employed within your organization.
Measuring employee retention is a great way to assess how successful your recruiting process is overall. Of course, retention rates will vary across industry and job roles, however, The Bureau of Labor Statistics reports the average annual retention rate is around 60%, ranging from 25% for hospitality roles to 80% for government roles. This HR metric is imperative for any HR department.
How to Calculate Employee Retention for HR Metrics
(# of new hires who remained employed during time period) / (# of new hires at start of time period) x 100
7. Healthcare Cost Per Employee
The healthcare cost per employee is the amount that a company pays for healthcare insurance benefits for each full-time employee.
Health insurance costs are baked into every HR budget. Companies typically want to offer competitive health benefits to employees as it increases retention and entices new talent. However, program costs should be benchmarked against the market and similar companies.
How to Calculate Healthcare Cost Per Employee for HR Metrics
Healthcare Cost Per Employee = total healthcare cost /total employee sign-ups for healthcare
Why is Healthcare Cost Per Employee an Important HR Datapoint?
Health insurance options can be a key differentiator in where candidates choose to work full-time – especially when there is a candidate scarcity. As an employer, you have to make sure that healthcare costs per employee are both reasonable and balanced. Employers may want to move to another insurance provider that offers lower rates for growing companies or offers superior healthcare options and coverage at a similar cost.
Here’s the full 15 minute HR Metrics on-demand webinar from our 2021 HR Summit.
3 Tips for Successful HR Data and Metrics:
- Keep HR metrics fairly simple, easy to read and understand by stakeholders
- Make HR metrics trackable in a spreadsheet, dashboard, or digital reporting system
- Measure over time: Make sure to measure over consistent time periods to track growth or reduction. Track month-over-month, quarter-over-quarter, and year-over-year movements.
As always, don’t forget:
“You manage what you measure.”
You can’t streamline your HR processes if you aren’t actively diving into your data and discovering where there’s an opportunity to fill gaps. Keep your finger on the pulse of your HR metrics and you can’t go wrong!
Have any HR or hiring questions? Consult Star Staffing’s HR and recruiting experts at Star Staffing.