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Keeping track of key performance indicators (KPIs) is vital to the success of any business – and every department, including human resources (HR), should be utilizing these metrics.
HR KPIs are the metrics used to monitor the effectiveness and productivity of your human resources department. Typically, this data is used inform your overall business strategy, allowing you deeper insights into how your team functions during a specific period of time.
In this guide, you’ll learn about some of the HR KPIs you can track, how to set up an efficient strategy, and how to get started with the best HR software to monitor your chosen metrics.
What Are HR KPIs?
Human resources key performance indicators — more casually known as HR KPIs — are a means of tracking important business metrics used to measure how effective your HR department is at managing employees. They can help inform strategies, highlight problem areas, and generally assist in managing the human resources aspect of your business.
HR KPIs go beyond the basic employee information you’d track by default, such as salary, vacation time, and length of service. Instead, these kinds of KPIs should get a bit more granular, digging into how employees actually feel about the company they work for, how well they are performing beyond expectations, and whether they are developing in the long run.
Obviously, there are some elements of HR efficiency that are more qualitative, but HR KPIs seek to turn some of the more quantifiable information into actionable reports that can help you stay up to date in regard to how your company runs on a regular basis.
What Are the Benefits of Tracking HR KPIs?
Now that you know what HR KPIs actually are, who cares? Tracking all this information sounds like a lot of additional work, and if you’re already strapped for cash, it can seem like an unnecessary cost for your business.
However, the reality is that there are a lot of benefits to tracking HR KPIs that can help improve your business and will show a serious return-on-investment in the long run. Here are some of the benefits of tracking HR KPIs at your business:
- Sets expectations – Tracking HR KPIs ensures that everyone on your team knows what is expected of them, and provides a bit of transparency for your strategy.
- Improves strategy – Understanding metrics around turnover rate, employee satisfaction, hiring, and onboarding, for example, can help you tackle problem areas and more effectively plan for the future.
- Saves money – Understanding problem areas early on can prevent costly mistakes and redundancies, saving you money in the long term.
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Examples of HR KPIs to Track
Now that you see the value of HR KPIs, it’s time to get started. The initial process can be a bit daunting, particularly given that the number of HR KPIs you could potential track is essentially infinite.
Below, we’ve given some examples of valuable HR KPIs that you could focus on. It’s important to remember, though, that the HR KPIs you choose to track should largely depend on your particular business strategy. Have a think about your goals, and what you specifically want your HR department to achieve in the short and long term, before deciding which HR KPIs you actually want to implement.
Employee turnover
Arguably the most important HR KPI you can track, employee turnover describes the rate at which employees leave your company over a given period of time.
Employee turnover is important to track because when it’s high, it can be incredibly costly to a business. In fact, dealing with the aftermath of a departing employee can cost between 30% and 150% of their salary, according to one study.
How to calculate – Divide the number of leaving employees by the total number of employees and multiply by 100.
Absenteeism
Another potentially important KPI to track is absenteeism, which describes the amount of time or number of days an employee is not at work.
Like employee turnover, absenteeism has an understandably negative impact on your bottom line, as it impedes productivity. After all, you can’t get work done if your team isn’t at work. When your absenteeism rate is high, you’ll want to investigate the effectiveness of your schedule and the motivation of your team.
How to calculate – Divide the number of absent working days by the number of total working days and multiply by 100.
Employee engagement
Employee engagement is a bit more difficult to measure than turnover or absenteeism, as it describes the emotional investment and overall engagement of your team.
As you can imagine, employee engagement directly impacts everything from productivity to turnover, so you’ll want to be sure you’ve found a good way to measure it.
How to calculate – Employee surveys and attitude assessments are the only way to really measure employee engagement.
Diversity, equity, and inclusion
Diversity, equity, and inclusion — sometimes referred to as DEI — describes the percentage of employees from different age, gender, race, ethnicity, sexual orientation, and disability statuses.
Successful companies value different perspectives when it comes to their business strategy, which is why diversity, equity, and inclusion is viewed as such a worthy pursuit. Plus, it makes your team feel appreciated and valued on a day-to-day basis.
How to calculate – Divide the number of employees from diverse backgrounds by the total number of employees and multiply it by 100.
Employee retention
Sort of the antithesis of employee turnover, employee retention describes the rate at which your company can retain employees over a given period of time.
As you can imagine, employee retention is a decidedly important HR KPI to track, as it monitors how well your business encourages team members to stay at the company for a long time. And given the cost of new hires, it’s safe to assume that this metric can directly impact the success of your business.
How to calculate – Take the number of total employees at the end of a given time period minus the number of employees that left during that time period. Then divide that number by the number of employees at the beginning of that time period, and multiply by 100.
Training and development
Training and development can be measured in a few different ways, but doing so should keep you aware of the effectiveness of training and development programs at your business, for both new hires and existing employees.
New hires are already expensive without inefficient training and development, which is why this HR KPI is so important to track. If you have team members who are repeating training or failing development programs, it might be time to revisit your strategy.
How to calculate – Return-on-investment is a good way to calculate this. You can get that by taking the training benefits — which can be quantified in many different ways, like time to promotion or productivity of new hires — minus the training costs, and then dividing that number by the total training costs.
Employee satisfaction
Similar to employee engagement, employee satisfaction is a HR KPI that measures the happiness and fulfillment of your employees in regard to workload, environment, team chemistry, and general working experience.
Employee satisfaction is key for businesses that want to be proactive instead of reactive. This metric can help you solve problems before turnover or absenteeism rates get too high, as low satisfaction can often directly lead to spikes in both.
How to calculate – Like employee engagement, employee satisfaction can only really be measured through employee surveys, so be sure to regularly engage your employees in a way that would allow them a space to provide quantitative feedback about your business.
Cost per hire
As you can likely guess from the name, cost per hire is an HR KPI that describes that amount of money that goes into hiring a new employee.
If you want to optimize your recruiting and hiring process, understanding your cost per hire can be a good first step. After all, if the cost is getting too high, you might want to make some changes to how you recruit, onboard, and train your new employees.
How to calculate – This one is easy. Just take the total cost of recruitment and divide it by the total number of new hires.
Employee productivity
Employee productivity is another valuable HR KPI that describes the effectiveness of an employee when it comes to doing their job. It can relate to the speed or accuracy of the work, or a combination of both.
While it may be somewhat difficult to calculate, finding a way to measure the productivity of your employees is the best way to ensure your team is on the right path. If productivity is low, you may need to check in on training and development programs, as well as the effectiveness of your management strategy.
How to calculate – This will require some level of involvement from other business KPIs, as you’ll need to find a concrete way to measure productivity at your business before you can measure this effectively.
Time to promotion
Another easy one to guess based on the name, time to promotion describes the amount of time it takes for an employee to receive a promotion after joining the company.
Promoting internally is a much more affordable means of filling new roles than hiring externally, so understanding how often your employees receive promotions can help you manage your talent acquisition strategy in a cost-effective way.
How to calculate – This is another easy one. All you have to do is take the total number of days/months/years spent by employees in their current roles and divide it by the number of employees that have received promotions.
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What Makes an Effective HR KPI?
Knowing which HR KPIs to track is one thing. But if you want to really get the most out of tracking these metrics, you’re going to need to have a clear and effective strategy in place that will ensure the best results. Here are some characteristics of effective HR KPIs that can help your business:
- Clear parameters – A good HR KPI is clear and concise, ensuring that the definition of what’s being tracked doesn’t cause more confusion than it aims to solve.
- Quantifiable information – By definition, KPIs have to be actually quantifiable, so that you can track it in a meaningful way rather than taking a nebulous and changeable approach.
- Actionable data – The goal of tracking KPIs is to use the data gleaned to inspire action, which means the data you collect needs to be usable in a strategy meeting.
- Logical deadline – KPIs should always have a time period in mind, so that you can compare data from different eras, better informing your long-term strategy.
- Strategy-driven focus – You want to be sure that your KPIs actually align with the goals of your company, so they can help you make decisions that positively impact your team and drive your business forward. There’s no point tracking something if you can’t use the information gained to improve things.
It’s also important to remember that quality is more important than quantity when it comes to HR KPIs. As we’ve explored, there are so many HR KPIs to potentially track, so be sure to pick a few that actually align with your strategy, rather than trying to track everything and see how it shakes out.
How to Track HR KPIs Using Software:
With the bounty of HR KPIs to track, the idea of handling all of this analytics work can be pretty daunting. After all, what are you supposed to do – look up all these metrics on your own and put together an in-depth report by hand? Of course not! There are plenty of online platforms that are designed to track and organize HR KPIs for you.
When it comes to HR KPIs, you’ll want to look at platforms that can collate the information you need and provide custom dashboards, as these tools will allow you to input exactly which HR KPIs you’re interested in tracking.
If you want to get started today, be sure to check out our primer on HR software and take a look at the table below, which outlines some of the features you can expect from these tools, as well as typical HR software prices for our top picks.
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Global hiring
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| Try Rippling | Try monday.com | Try Deel | Try Paycor | Try Paychex |
We’ve learned a lot in this guide to HR KPIs. We’ve learned that they are metrics used to measure the productivity of your human resources department, that they can help you action strategies and save money, and that there are a lot of potential KPIs to choose to track, so you better know your strategy inside and out.
Perhaps most importantly, though, we’ve learned that HR software can do a lot of the heavy lifting for you when it comes to tracking KPIs, so you don’t have to add a lot of work to your schedule. Just find the right one that fits your particular needs, and you’ll be on your way to solid HR productivity in no time.
Find out how much HR software should cost with our guide to HR software prices.
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