The right HR-to-employee ratio makes it possible for HR teams to efficiently manage administrative programs while balancing time for strategic endeavors. All of this can lead to lower turnover, higher employee engagement and a smoother-running organization.
Retaining and engaging employees is the top priority of CEOs this year, according to a recent Chief Executive survey. This means organizations are increasingly looking to their HR teams for initiatives, practices and support for these business goals — and that’s on top of managing other people-related responsibilities, like benefits administration, payroll processing and training and development oversight.
Having the right HR-to-employee ratio is crucial to your success. Issue four of the ADP Today at Work report delved into how HR staffing has seen an uptick, possibly due to the challenges of recruiting in a tight labor market. The report noted that “using an HR staffing ratio — the number of HR personnel for every 100 employees — we found that HR staffing is up more than 11 percent since 2018 (from 2.35 to 2.6 per 100 employees).”
With overall HR staffing on the rise, many organizations wrestle with a common question: How many HR team members do we need? There’s no universal equation to determine that answer. There are just too many variables involved. And adding more HR staff is not necessarily better.
In this article, we’ll explore the benefits of finding the right HR-to-employee ratio at your organization, the downsides of a mismatched ratio and how HR and business leaders can evaluate their ideal team size. For valuable insights and actionable advice on this complex topic, we consulted with Deb Hughes, senior vice president, HR communications and change management at ADP.
Benefits of a right-sized HR-to-employee ratio
One of the key benefits of an appropriate HR-to-employee ratio is its positive impact on employee retention. Our research found that organizations with a ratio of less than 0.5 HR staff per 100 employees had 5.8 percent monthly turnover, while organizations with 2.5 to 3.5 HR staff per 100 employees reduced monthly turnover to 4.5 percent.
“Having the right HR-to-employee ratio ensures that the HR team is not only focused on the tactical,” Hughes said, “and that the HR team members have the time to spend on employee career growth and development, engagement initiatives and wellness activities leading to more engaged and motivated employees.”
Hughes is quick to point out that retaining employees is not the only benefit of having a right-sized HR team. The right ratio enables HR teams to focus on strategic talent management and efficient administrative tasks while being able to support business growth and pivot to address changing staffing needs.
Pitfalls of an imbalanced HR-to-employee ratio
Having too few HR team members for your workforce can lead to burnout, which can easily snowball into other challenges for the organization as a whole.
“Harried, overwhelmed and overworked HR team members are not going to be at their best to attract new talent or retain your best talent,” Hughes said.
“Modernizing hiring practices, making good candidate selections and representing the organization well takes proactive planning—in other words, dedicated time to ideate and implement. When we shortchange the HR function, the team members tend to not have time for the strategic and end up spending all their time on administrative follow-up, compliance, policing and policy management.”
How to determine the right HR-to-employee ratio
To reiterate, there is no universal equation for calculating the ideal HR-to-employee ratio at every organization. The right ratio can vary based on industry, types of employees or even location.
“Industries with higher workforce demands or diverse roles may require different ratios for effective HR support,” Hughes said. “Industries with standardized processes, streamlined operations and fewer HR-intensive activities may require a lower HR-to-employee ratio. For example, manufacturing or assembly-line industries might have lower ratios compared to organizations with complex roles and high employee engagement needs.”
HR technology also can affect the size of your HR team. But that doesn’t necessarily mean that technology can simply replace HR team members.
“Artificial intelligence (AI) can help automate routine HR tasks such as resume screening, scheduling interviews and handling administrative processes,” Hughes said. “The key is to remember that having humans in the loop will continue to be critical in terms of bringing the human experience to HR work. People are important, from ensuring that we are avoiding bias and leaning into the right situational context, to assessing all output in terms of legal compliance, to supporting employees from a compassion, empathy and human perspective. Humans need to review and tweak any generative AI output for the right tone from culture, connection and inclusivity standpoints, and even for the nuances of different languages, to account for human complexity.”
To assess the optimal HR-to-employee ratio, Hughes recommends HR leaders consider these questions:
- What is the size and structure of our organization?
- What are the unique HR needs within our industry?
- How complex are the roles and responsibilities across various departments?
- What level of employee engagement and support is required?
- Are there specific compliance or regulatory considerations?
- What is the tenure and needs of the leaders?
- How technologically advanced are our HR processes?
- What are our business growth objectives, and are we ready to scale up to meet these demands?
Other considerations for HR team size
After evaluating the current size of your HR team and comparing it with the ideal size, HR leaders will generally find themselves in one of two positions: needing to add HR staffers or needing to address an overstaffed HR team.
Adding HR staff
Expanding an HR team—like any team within your organization—is perhaps easier said than done. And in most cases, the biggest challenge will be securing budget approval. Hughes suggests that HR leaders tackle this challenge with a highly organized and well-researched proposal that covers the following areas:
- Benchmarking. Compare the proposed team size to industry benchmarks or similar organizations, showcasing the competitive need.
- Communication of stakeholder benefits. Use data-driven insights and metrics to organize a persuasive, fact-based communication.
- Cost-benefit analysis. Provide a detailed cost-benefit analysis outlining the potential ROI for the organization.
- Highlight pain points. Identify current HR challenges or pain points that would be addressed with more HR staff.
- Strategic initiatives. Emphasize how the expanded team will support strategic initiatives and contribute to organizational growth.
- Quantify impact and link to business goals. Clearly articulate how the expanded team will positively impact key business metrics and organizational performance.
Addressing overstaffing
According to Hughes, HR leaders who determine their teams are overstaffed should take these four steps:
- Assess each HR team member’s workload to identify redundancies or inefficiencies.
- Explore HR technologies that can automate routine or repetitive tasks to free up time for strategic initiatives.
- Consider cross-training HR staff to increase flexibility.
- Solicit team member input on processes that are ripe for re-engineering or improvement.
Striking the right balance for HR-to-employee ratio
Finding the optimal HR-to-employee ratio is crucial for organizational success. With the right balance, organizations can enhance employee retention, talent management and administrative efficiency, while avoiding overwhelmed HR teams and recruitment challenges. Although there’s no universal solution, HR leaders can evaluate team size by considering factors such as organizational structure, industry needs and technology. By taking a data-driven approach and communicating strategically, organizations can ensure their HR teams are equipped to navigate the complexities of the modern workforce landscape and foster a culture of engagement and growth.
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This article originally appeared on SPARK powered by ADP.
