What’s the Correct HR-to-Employee Ratio? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

What’s the Correct HR-to-Employee Ratio?

Get PDF file

by on
in Best-Practices Leadership,Employment Law,HR Management,Human Resources,Leaders & Managers

Used in HR Weekly -- July 24, 2007. Posted online for a week the same day.

Issue: It can be easy to misuse or misinterpret the controversial HR-to-employee ratio.

Benefit: That metric can help measure HR effectiveness, but only if interpreted and used correctly.

Action: Recalculate your ratio using the advice below, then use the number as a guide for future staffing.

HR-to-employee ratios are a somewhat controversial metric that can help establish HR staffing and determine how well HR delivers services. But you should calculate and use the number correctly, or don't use it at all.

"The ratio is very helpful if you know what you're doing," says James Hatch, a partner with PricewaterhouseCoopers' Saratoga Institute, which specializes in HR metrics. "But it can be very dangerous if you don't know what you're doing."

One key danger: Executives may use ratios as a reason to cut HR staff.

Looking for more information to advance your skills as an HR professional? — Get The Complete Compliance Guide to Federal & State Employment Law now!

Many HR professionals don't calculate the ratio correctly. Here's how to do it right: Divide the number of HR full-time equivalent (FTE) positions by the total number of employees (FTEs), then multiply the outcome by 100.

Example of a six-employee HR department at a 250-employee company:

                   6     ×   100   =   2.4 ratio


But HR professionals often include or exclude the wrong HR jobs in the formula. The ratio should include HR professionals who work as generalists and those in areas such as benefits, compensation, labor relations and organizational effectiveness, says Hatch. The ratio should exclude payroll and training-and-development employees.

High HR-to-employee ratios in smaller organizations (see chart below) may mean that it takes a minimum HR baseline to deliver primary HR services. But once that baseline is met, the incremental amount of HR staff required to support more employees doesn't increase at the same rate.

If your ratio is higher than average, examine your HR department's role.

If the role is primarily organizational asset preservation—preventing litigation by overseeing policies, cutting HR costs and outsourcing—then a ratio of 1.00 (1 per 100 employees) for large employers is the standard benchmark. If your department's goal is asset creation—an ongoing alignment with business strategy—then the ratio could be near .60 (1 per 166 employees).

High HR ratios aren't necessarily bad for departments that are strategic partners, have mature self-service technology and decentralized HR departments. Example: A hotel chain with a core strategy to provide intimate customer service maintains a .80 ratio compared to 1.3 for competitors.

Suppose your HR department has a high ratio, but isn't a strategic partner and has few automated HR services. Look to streamline services and possibly outsource.

Low HR-to-employee ratios can be misleading. "A low ratio might mean you get things done quickly, but if you're getting the wrong thing done quickly, it has no value," says Claudia Schwartz, principal of HR Results consulting firm.

Schwartz once used a high ratio to ask for more employees when she headed the HR department at a 10,000-employee company. However, she used the ratio as only one piece of the information to make her case, and she made sure to measure the number accurately.


{ 6 comments… read them below or add one }

buks May 9, 2015 at 8:03 pm

What is the ideal ratio of front office to back office staff ratio for a commercial bank?


Perry February 10, 2015 at 3:32 am

how to calculate manpower ratio of an organisation as a whole and not department wise? Please help..


DonnaF January 8, 2015 at 3:48 pm

I’m in agreement with Donna Anderson here. I’ll throw in another – recruitment. Is the HR Generalist responsible for full cycle recruiting or is there a separate corporate recruiter which according to this article doesn’t count in the ratio.


Donna Anderson November 24, 2014 at 12:01 pm

The problem with these ratios is that what companies ask from their HR staff varies greatly. Payroll is sometimes under Finance but sometimes under HR. If the company is small but global, they might be asked to handle immigration issues. If the company relocates new hires, HR would handle this; whereas a company that never reocates new hires would not require this from HR. Is Safety under HR or elsewhere? And if the company includes a plant environment, Safety will require more time than if it’s an office. Are employee satisfacxtion surveys conducted by HR, and is follow-up done by HR? Is HR expected to coordinate the holiday party and company picnic? There are so many variables; and if a company expects all of this and more, 1 to 100 is a ratio that is not going to work.


Haidar June 28, 2015 at 4:55 am

Well Thank you for raising these issue.. I have same concerns.. are Safety and immigration sections under HR?


connie December 1, 2011 at 10:24 pm

I would like to know how meny employees are required to take care of 43 residents per an 8 hr shift… lets say you have 43 residents and there is only 1 to 2 CNA’s.. is that leagle? Please let me know soon..
Thank you


Leave a Comment