3 Key HR Labor Metrics (And Why They Matter)

HR professionals often face a lot of uncertainty in their roles. Between the risks of employees leaving or being let go due to budgetary constraints or behavioral issues, a sea of ever-changing compliance regulations, and a shifting labor market, working in human resources can feel like a real challenge. Understanding the data behind the workforce is key, and to gain that understanding you need to look at three key HR labor metrics.

Keep reading to learn more about these HR labor metrics and why they matter, as well as how the right time and labor platform can provide access to critical data that drives better decision-making.

What are HR Labor Metrics?

HR labor metrics are measurements that allow professionals working in human resources to evaluate their performance and results. On the recruiting side of HR, metrics may include the cost-per-hire and time-to-fill. When tracking employee satisfaction, individuals can look at the retention rate and engagement. If a company needs to address issues with labor shortages or high turnover rates, data can provide insights into why people are leaving and where to make improvements.

Although each HR labor metric plays a role in the function of the department and the success of the company overall, we’ll focus on three key ones.

Tracking 3 Key HR Labor Metrics

Business leaders are often concerned about a few elements of the cost of labor. These include the productivity and engagement rates of employees, the costs associated with high absenteeism rates, and whether too much is being spent on labor.

When looking at the overall spend associated with the workforce, it’s helpful to review three key metrics: absenteeism rate, total labor cost, and turnover rate.

Absenteeism rate

The absenteeism rate of your business refers to the percentage of days missed by an employee that were not planned or expected. If you divide the number of unexpected absences by the total number of days in the tracking period, then multiply that number by 100, you’ll get the percentage.

Example: Rodney missed 12 workdays during a 90-workday tracking period.

(12 / 90) x 100 = 13.3 percent absenteeism rate.

The average absence rate for a full-time employee is 3.6 percent.

High absenteeism rates often indicate a dissatisfaction with work. They can also mean that an employee is experiencing personal issues that may require additional support. The best option for an HR leader is to calculate the absenteeism rate for each employee, and communicate with those who have higher rates to better understand why. Identifying reasons can help your HR team provide support or make organizational changes that benefit the entire workforce.

Total labor cost

The total labor cost is the full amount paid to employees based on hours worked, plus any benefits provided and payroll taxes paid. You can calculate this metric by dividing the total sales revenue by the total payroll (which includes the cost of payroll taxes and benefits).

Looking at accurate labor costs helps company leaders to identify trends and make adjustments. For example, unplanned overtime can wreak havoc on a labor budget, costing your business money at every turn. You need access to that data to assess when employees are working overtime, which departments tend to log the highest number of OT hours, and whether any similar trends occurred in the past.

Turnover rate

The turnover rate is another factor in the total cost of doing business, and it’s one you can’t afford to ignore. Economic conditions remain uncertain, although with a different set of circumstances than were present even a few years ago. Certain industries have higher-than-average turnover rates, including hospitality, healthcare and food service.

Assessing your company’s turnover rate involves dividing the number of employees who left by the total number during a set tracking period.

Example: Five employees quit over a three-month period. During that time, the company had 40 employees.

40 / 5 = 8% turnover rate

The national turnover rate average is 3.8 percent in the U.S. But rates fluctuate drastically between industries, so compare how your company rate stacks up against others in your same sector.

If the rate at your company is higher than average, changes may need to occur. High turnover rates often put extra pressure on the employees who do stick around. They can cause a decline in morale, which impacts the entire workforce. Plus, it’s expensive to constantly hire and train new employees. Investing in employee retention strategies is your best bet to keep costs down and morale high.

Rely on WorkforceHub to Track Metrics and Manage Your Workforce

With WorkforceHub, tracking these HR labor metrics is easier than ever. You can pull reports with critical details, including the absenteeism rate of individual employees. Use that information to calculate the financial impact of employees who are frequently absent from work, then make decisions. Your business budget will certainly benefit from data-driven decision-making, especially around something as costly as labor.