HR Cost per Employee
Total cost of running the HR function divided by total headcount
What is HR Cost per Employee?
HR cost per employee is the total cost of the HR function divided by the average headcount. It shows how much is spent on HR support for each person.
It is used to gauge the efficiency of the HR function, though it must be read alongside the quality of service.
How this KPI is measured
- Function
- Human Resources
- Sub-function
- HR Operations
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- $
- Measurement frequency
- Annual
- Formula
- Total HR function costs / Average headcount
How to calculate it
Divide total HR function costs by average headcount.
For example, if HR costs were 800,000 and average headcount was 1,000, the cost per employee is 800.
Include HR staff, systems, and outsourced services consistently, and compare with your own history and similar organisations.
Where it is used
Managing HR budget
Track cost.
Benchmarking
Compare with peers.
Evaluating change
Assess new systems or outsourcing.
How to improve it
Tips and common mistakes
- The lowest cost is not the goal. Balance with service quality.
- Compare against similar sectors and sizes.
- Include the cost of HR systems.
More Human Resources kpi library
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