What is the ideal HR cost to the total business revenue ratio? What are other important ratios which an HR should know?

Hello experts, What is the ideal HR cost to the total business revenue ratio?
Apart from this, what are other important ratios which an HR should know?
Regards

Hi Amar,
Is't for an academic interests for a practically oriented application. Moreover, you have to tell us more about the users, the entity, the operations-whether producers/manufacturers or service providers, size, location(s), practices followed whether recruitted, trained thru' hired consultants or carried out in-house, appx. turnover p.a. etc.

Dear Amar,

You could have mentioned your industry, nature of your finished product etc. The HR cost to business ratio will vary from one industry to another and from one company to another. This is because every company has its own business model. Look at HP and Dell. Though both manufacture the computers, laptops, printers, servers etc, their business models are different.

To settle your query, let me suggest you measurement of:

a) HCROI: - Earlier I have given a comprehensive reply. You may click here to refer to my reply.

b) Labour Index: - Labour Index: - The ratio of quality cost to direct labour hours, it has the advantage of being easily computed (from accounting records) and easily understood, but it is not always effective for long-term comparative analysis when technological advances reduce labour usage.

Thanks,

Dinesh Divekar

Mr Amar,

Thanks for your question. It mus be known to every HR person. It will increase your Business Accumanship. The HR cost is varying from 2.5% to 13-14% and depend upon the size and volume, class of Business, Product and service, Technology and Level of automisation, modernisation & digitalization etc.

Fundamentally, HR is a support activity and give support to Business by providing skill sets/ competencies across the organisation at all hierarchy levels, work-culture/ work environment, higher employees Engagement, boundary management and Image building of the Organisation.

In view of the above, HR person must know all strategic Planing and revenue ratios, such as fixed cost, Variable cost, market share of the Product/service, HR cost, Consumtion Ratios( Raw material, Energy- Power and Steem), packing matirials ratio, Marketing/ Sales ratios, product/ service mix ratio and Administrative cost ratio etc and their monthly variation ratios from the Budgeted ratios. The HR person must know EBIDTA, PBDT( Proft Before Taxes) and Tax ratio etc too.

Apart from it, He must know the ratios of his department like Employees Engagement ratio, employees turn-over ratio, training cost ratio, departmentwise and levelwise employees cost ratio, Absentee ratio and direct and indirect cost ratios.

I think , now you will have more clarity on your quarry. Please feel free to write any quarry/ question/ thought for discussions.

Thanks

Gauging business against ROI and expenses or input capital calls for identifying these ratios.
However HR in terms of head is countable but in terms of excellence, talent and competencies etc will depend on the various other factors where Human assests are dealt with.
The value of human resource asset can not be gauged but it can definitely be improved to get more productivity and hence the ROi.

Hi Amar,
The attached article on HR costs might be of some help to understand HR metrics which are form part of SHRM.

grateful to have stumbled upon this information.
HR Manager plays vital role in any organizations.
https://technologycounter.com/hr-software

HR Efficiency Ratio
An average HR staff to employee ratio is around 2.57 for all organizations. Small organizations have higher ratios with an average of 3.40. Medium organizations often have ratios around 1.22 while a normal ratio for large organizations is 1.03.
I hope this will help you.