ROI stands for Return on Investment, this means that employee ROI refers to how much you get in ‘return’ from ‘investing’ in your employees. It is also known in the HR industry as human capital ROI.
Business owners use the employee ROI in order to quantify the impact an employee has on their business and if they are worth the ‘investment’. It takes into consideration the employee’s knowledge, experience and skills, and how this can benefit your business.
Employee ROI takes into consideration all the costs and expenses that go into employing an employee and puts it against the revenue said employee generates. It helps business owners by having a calculation in place to quantify something that is very difficult to quantify and gives the employer an idea of whether or not an employee is worth the cost of keeping them in the organisation.
There are several ways to calculate Employee ROI depending on what exactly you’d like to calculate. Here at HRLocker we have created an online Employee ROI calculator to help you with some calculations that may be worth your while. We have created calculators for the following:
This is the overall return on investment of an employee, taking into consideration revenue, expenses and compensation.
Calculating your employees productivity level is an interesting and useful tool used in order to monitor how incentives have an effect on your workforce. It can also help on an individual basis as it can act as a guide for managers to understand what motivates their employees to generate more revenue.
An important part of the recruitment process is the training costs incurred for new employees. It’s important to record this in order to be aware of the hidden costs that the business will have when budgeting for new hires.
Calculating employee absenteeism helps to prevent a knock-on effect within the organisation, in some cases an employee with high absenteeism may influence other employees to do the same. Monitoring the absenteeism gives managers an overall overview of how efficient and productive their workforce is. An employee with high absenteeism may also be required to undergo a disciplinary procedure.
In today’s market, both potential employees and investors/partners are interested in the employee turnover rate of a company. It shows the environment the company keeps and how stable they are. Keeping an eye on your organisations employee turnover rate can benefit you by keeping tabs on the situation and can also be used as data to publish if you are satisfied with the results.
If you would like to find out how you can calculate these Employee ROI’s, we have created an all-in-one calculator: