10 Staff Ratios That You Need to Know (Especially #7 )

Staff ratios provide a standardized way of tracking and comparing any workforce to another. As organizations strive to streamline operations, make informed staffing decisions, and maximize productivity, specific employee ratios can offer a path to success.

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What Are Staffing Ratios?

Staffing ratios are metrics that represent the relationships between various staffing levels, costs, and productivity indicators. By analyzing staffing ratios, companies can answer important questions like:

• Are we overstaffed or understaffed?
• Is our revenue generation per employee optimal?
• How do we compare with competitors in our industry?

These ratios can be particularly valuable for assessing both the efficiency of individual departments and the organization as a whole. For instance, ratios like revenue per employee can provide insights into productivity, while the HR to employee ratio sheds light on resource allocation in the HR function.

10 Staff Ratios for Every Business (With Examples)

1. Revenue per Employee

Revenue per employee is a primary measure of a company’s productivity. It divides total revenue by the number of employees, showing how much revenue each employee generates. It is calculated as follows:

Revenue per Employee = Annual Revenue / Total Employees

Example calculation: $120M of revenue ÷ 800 employees = $150K revenue per employee

A higher ratio indicates higher productivity and efficiency, suggesting that employees are contributing significantly to the company’s revenue. In comparison, a lower ratio can indicate that there is an opportunity to improve productivity.

2. Revenue per Function Employee

Revenue per function employee focuses on productivity within specific departments, such as finance, marketing, or sales. This ratio provides a closer look at departmental efficiency, helping companies to optimize staffing levels. The formula is:

Revenue per Function Employee = Annual Revenue / Employees in the Function

Example calculation: $120M of revenue ÷ 120 sales employees = $1 M per sales employee

This ratio is particularly useful for commercial functions, such as sales, marketing, and customer support, where revenue is a key driver for the number of headcount required.

3. Function as % of Employees

This ratio measures the proportion of employees in a specific function relative to the entire workforce, helping companies understand their staffing distribution.

Function as % of Employees = (Employees in the Function / Total Employees) * 100

Example calculation: 60 marketing employees ÷ 800 total employees × 100 = 7.5% of workforce

Tracking this ratio can reveal whether particular departments are overstaffed or understaffed when compared to industry standards.

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4. Operating Expense per Employee

Operating expense per employee measures the average cost to maintain each employee, including salaries, benefits, and other overheads. Lower ratios can indicate a more cost-efficient workforce. The formula is:

Operating Expense per Employee = Annual Operating Expenses / Total Employees

Example calculation: $48M of OpEx ÷ 800 employees = $60K per employee

This ratio helps organizations balance expenses and ensure that staffing costs align with revenue and profitability goals.

5. HR to Employee Ratio

The HR to employee ratio measures the number of HR staff supporting the workforce. It helps determine whether HR staffing is proportional to the needs of the workforce, especially as a company scales. Here’s how to calculate it:

HR to Employee Ratio = HR Employees / Total Employees

Example calculation: 12 HR employees ÷ 800 employees = 1.5% or 1 HR per 67 employees

A lower percentage may indicate an under-resourced HR function, while a higher percentage could suggest inefficiencies in HR processes.

6. Management to Staff Ratio

The management to staff ratio compares the number of managers to non-managerial employees. This is a classic metric and sometimes referred to as the average span of control. It is used for assessing organizational hierarchy and can indicate if a company is too top-heavy or too lean in management. The formula is as follows:

Management to Staff Ratio = Total Managers / Total Staff (non-managers)

Example calculation: 80 managers ÷ 720 non-manager staff = 1 manager per 9 staff

A high ratio could mean excessive management overhead, while a low ratio may indicate a need for more managerial oversight.

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7. Turnover Rate

‍Employee turnover measures the rate at which employees leave the organization, providing insights into employee satisfaction and retention. This ratio is so critical because it reveals whether there are underlying workforce issues - Employees who are unhappy or feel undercompensated tend to leave, which is exactly what this metric measures. Here's the formula and calculation:

Turnover Rate = (Employees who left during a period / Average number of employees) * 100

Example calculation: 96 employees who left ÷ 800 average employees × 100 = 12% turnover

High turnover can disrupt productivity and incur additional hiring costs. Tracking the turnover rate enables companies to identify trends, address retention issues, and maintain a stable workforce.

8. Absenteeism Rate

The absenteeism rate tracks the percentage of workdays missed due to unplanned absences. High absenteeism can be a sign of workplace issues such as burnout or low morale. This is the formula:

Absenteeism Rate = (Total Days Absent / Total Workdays) * 100

Example calculation: 2,400 total days absent ÷ 208,000 workdays × 100 = 1.15% absenteeism

9. Time to Hire (TTH)

Workable states that the time to hire measures the average time required to fill an open position, reflecting recruitment efficiency and attractiveness as an employer. Shorter times indicate effective hiring processes, while longer times may point to issues in recruitment or a competitive job market. It is calculated as:

Time to Hire = Total Days to Hire / Total Number of Positions Filled

Example calculation: 1,200 total days to fill 30 positions ÷ 30 positions = 40 days per hire

Optimizing time to fill can help companies reduce downtime and maintain consistent productivity levels.

10. Labor Cost as % of Revenue

Labor cost as a percentage of revenue shows what portion of the company’s revenue goes toward paying employees. This ratio is key for managing budgets and profitability, particularly in labor-intensive industries. The formula is as follows:

Labor Cost as % of Revenue = (Total Labor Costs / Total Revenue) * 100

Example calculation: $36 million labor costs ÷ $120 million revenue × 100 = 30% are labor costs

A high percentage may signal a need to optimize workforce expenses, while a lower percentage can indicate an efficient use of labor. This formula can also be split by function for a deeper understanding of where opportunities may exist.

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Turning Ratios into Results

Understanding these 10 staffing ratios provides valuable insights into the operational health and efficiency of an organization. Each of these metrics tells a part of the story, whether it’s the overall productivity of employees, the cost-effectiveness of different functions, or the efficiency of recruitment and retention efforts. By regularly tracking these ratios, leaders can make data-driven decisions that enhance both profitability and employee well-being.

But it doesn't stop there. Once you've calculated these staffing ratios for your organization, the next step is figure out whether they're good, normal, or bad. How? Compare your ratios to relevant external benchmarks. From here, you can turn these numbers into an action plan.