One of the most common metrics organizations use when deciding whether to hire HR professionals is the HR-to-employee ratio. When properly analyzed, this ratio can aid employers in meeting their HR needs and benchmarking their organizations against others.
It can help employers determine not only how to fill their HR staffing needs, but also analyze how well their HR professionals are delivering on organizational goals.
Today we'll explain the HR-to-employee ratio, how organizations can use it, and what employers should consider when deciding whether to hire HR professionals.
The HR-to-employee ratio measures how many HR professionals there are for each employee in an organization. It’s calculated by dividing the total number of full-time HR professionals by the total number of full-time employees in an organization and then multiplying that number by 100. For example, the HR-to-employee ratio for an organization with one full-time HR professional and 37 total full-time employees would be 1.37. As the total number of employees increases, the HR-to-employee ratio required to provide adequate service usually decreases, though this varies by organization.
The HR-to-employee ratio is a useful measurement for evaluating HR departments. It can guide an organization’s decisions regarding HR staffing, including whether its HR department needs additional support, is overstaffed, or can delegate or outsource certain functions. It can also help determine an organization’s HR efficiency, as a higher ratio could indicate a lower efficiency in delivering HR services.
According to Bloomberg’s HR Department Benchmarks and Analysis report, annual survey results revealed the median HR-to-employee ratio is 1.4 full-time HR professionals per 100 employees. This ratio is currently at an all-time high, as it previously peaked in 2013 at 1.3 HR professionals per 100 employees. The recent increase in the HR-to-employee ratio is primarily the result of unprecedented workforce growth and employers’ need to address the increased HR burden on their organizations.
Smaller employers (organizations with fewer than 250 employees) generally have a significantly higher HR-to-employee ratio—averaging between 1.7 and 3.4—because of the minimum number of HR professionals required to perform core HR functions, such as recruiting and benefits administration.
It’s not uncommon for smaller organizations in the early stages of growth needing to focus more on people management than more established organizations, resulting in a higher ratio. As organizations grow, the HR-to-employee ratio tends to decrease because of the cost advantages employers gain by increasing the size of their organizations.
FACTORS IMPACTING THE HR-TO-EMPLOYEE RATIO
Determining how many HR professionals an organization requires is difficult and depends on the organization’s needs and growth strategy. While the HR-to-employee ratio can guide employers as they make HR staffing decisions, it's only a guide, and it should be stressed that there are several factors that may influence this ratio. These factors include the following:
Other factors that may impact an organization’s HR-to-employee ratio include whether the organization is centralized or decentralized, where employees are located (e.g., a single location versus multiple locations), and the level of employee sophistication. The HR-to-employee ratio only accounts for full-time HR professionals, so there may be a gap between the metric and actual organizational needs.
DOES A SMALLER ORGANIZATION NEED HR PROFESSIONALS?
Regardless of an organization’s size, HR practices and processes play a role in an organization's success, whether completed by an owner or a formal HR professional. Small and midsized employers tend to implement more formal HR processes as they grow. This is because their compliance needs, cultural challenges, and talent struggles become increasingly complex with more employees.IN CLOSING
Understanding the HR-to-employee ratio and the factors that affect it can help employers evaluate the role of HR in their organizations. When making HR staffing decisions, employers should consider their organization’s specific needs and long-term goals. Using the HR-to-employee ratio can provide employers with insights regarding HR hiring practices and improving organizational efficiencies.
If you have any additional HR staffing questions, HUB's HR Capital Speciality Practice experts are an excellent place to start. If you are interested in learning more, please contact a HUB Employee Benefits Advisor today.