Every company needs the right number of HR positions to support its employees effectively. However, figuring out the ideal number can be tricky because it depends on various factors happening within your organisation. There’s also no one-size-fits-all solution, so how does one go about it?
In this article, we’ll explain the right HR-to-employee ratio for your company, giving you insights into what to consider and steps to take for optimal human resource management.
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What is an HR to Employee Ratio?
The HR-to-employee ratio is essentially a metric used to represent the number of HR professionals or HR full-time equivalents (FTEs) – the number of hours considered full-time – within an organisation relative to the total number of its employees. It’s usually expressed as a ratio, indicating the number of HR staff per a certain number of employees. For example, if you’re looking at a ratio of 1:100, it would mean that there is one HR team member for every 100 employees in the organisation.
Why is an Accurate HR to Employee Ratio Important?
The HR-to-employee ratio sounds like a trivial piece of information, but it’s an important metric for any company to consider when looking into their HR staffing levels and efficiency. The optimal ratio can vary depending on the specific industry, organisational size, or the range of HR processes performed day-to-day. Some organisations will require more HR support, especially if they have a diverse workforce or undergo significant changes in-house.
Let’s say, for example, that the ratio is lower. It means there are fewer HR managers for each employee. This might seem efficient, but it could mean that each HR team member has a lot of employees to take care of, making it hard to give personal attention to everyone. On the other hand, a higher ratio means more HR team members for each employee. While this might suggest a lighter workload, it could also mean having more HR staff than necessary, which may seem inefficient.
5 Factors to Consider When Calculating HR to Employee Ratio
When trying to determine the most accurate HR-to-employee ratio for your company, you’ll have to look at several variables to help you determine what may or may not be the perfect balance to keep everything running smoothly. Here are a few major components that will determine the winning formula in your workplace.
1) Organisation Size
Larger organisations often require more HR staff to handle the increased volume of employee-related tasks and issues. Moreover, the structure and strategic priorities of the organisation also play a role. For example, a company undergoing rapid growth or significant organisational change may need additional HR support.
2) Geographic Distribution
Suppose an organisation has a global workforce spread across different locations or countries, for example, offices across 3 different cities. In that case, additional HR support may likely be necessary to address an international team, local employment laws and cultural differences.
3) Nature of your Workforce
Consider the composition of your workforce, such as how many full-time employees, part-time employees, contractors, and remote workers there are. The more diverse your workforce is, the more likely it’ll be that it may require more HR support. To top it off, the range of HR functions performed by any HR manager, including recruitment, employee training, employee relations, and compliance, can also influence staffing needs.
4) Technology and Automation
If your company is tech-savvy, that may allow HR to handle more tasks with less staff. Automated systems, such as HRIS and self-service portals, streamline routine tasks, enabling HR members to manage larger workloads. And with technology for recruitment, workflow automation, and compliance management, organisations can optimise HR staffing levels.
5) Employee Engagement and Support
Take a look at whether the level of support and engagement the organisation aims to and from its employees is appropriate. Higher levels of support may require a lower HR-to-employee ratio to ensure personalised attention. On another note, experiencing high turnover rates may require more HR resources for recruiting, onboarding, and managing employee departures.
How to Calculate HR to Employee Ratio
The formula in itself is really straightforward. All you need is two key pieces of information: the number of HR FTEs and the total number of employees in your company. Once you have those two figures ready, you can go ahead and calculate them by dividing the total number of full-time HR team members by the overall count of employees in your company. Once that’s done, multiply it by 100, and you have your HR-to-employee ratio.
Example Calculations
According to research data by SHRM, the average ratio for all organisations is 2.57. When a company is small, the ratio is higher at 3.40, meaning there are more HR staff members for every 100 employees. But as companies get bigger, the ratio goes down. The ratio is 1.22 for medium-sized companies, and for large companies, it’s 1.03. A high ratio for small companies suggests that even though they have fewer employees, they need a certain number of HR staff to handle important HR tasks.
With that in mind, here are some relevant examples to guide you!
Example 1: The Small Startup
This startup, a small firm with 30 employees, has a single HR professional on staff. The company divides the number of HR employees (1) by its total workforce (30), resulting in 0.033. By multiplying this number by 100, their HR-to-employee ratio is 3.3. Compared to the standard of 3.40 for small organisations, they may consider assessing its HR team dynamics to understand why its ratio slightly deviates from the typical benchmark.
Example 2: The SME
A mid-sized SME with 120 employees has an HR department with 5 members. The company divides the number of HR employees (5) by its total staff (120), yielding a result of 0.042. When multiplied by 100, their HR-to-employee ratio is 4.2. Considering that the standard is 1.22 for medium-sized organisations, this SME might explore scaling back its HR department or exploring automated HR services to align its ratio more closely with industry averages.
Example 3: The Enterprise
This large-scale corporation has 800 employees, with a team of ten HR specialists. The company divides the number of HR employees (10) by its total workforce (800), resulting in 0.0125. After multiplying this figure by 100, this company finds they have an HR-to-employee ratio of 1.25. When assessing this ratio against the standard of 1.50 for large businesses, they might decide to maintain their current HR department structure due to the close alignment with industry benchmarks.
FAQs
Could my company require an HR-to-Employee ratio that differs from the industry standard?
It’s entirely possible. The optimal ratio depends on various factors, and while industry benchmarks provide guidance, it’s far more important to rely on your company’s unique needs and consider factors like employee engagement, the level of HR support required, and any specific challenges your organisation faces. Use the benchmarks as a reference point to reflect on whether your current setup is appropriate.
Do HR-to-Employee ratios change frequently?
HR-to-employee ratios can change over time. Companies experiencing rapid expansion may see a decrease in the ratio as HR resources are scaled to accommodate the larger workforce. Conversely, efficiency improvements, automation, or organisational downsizing may lead to an increase in the ratio. Conduct regular audits and be in the loop.
