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Proper evaluation of spending in each business department is essential to any organization. Measuring human resource costs is particularly beneficial for determining how the department impacts overall business goals. In demonstrating the efficacy of its department, HR can change its traditional reputation as a cost center. When the results are showcased through cost measurement, the influence of HR can be fully recognized.

Consider these reasons for measuring HR costs:

Cost efficiency

Perhaps one of the key reasons your company should measure HR costs is to ensure the effectiveness of your recruiting, hiring and training spend, Analytics in HR Blog and Academy explained. In nearly all business instances, success and results cost money – they require different levels of investments. When your company is actively recruiting and bringing in top talent that drive your company’s bottom line, that spend is critical. However, if money is being allocated to candidate sourcing that fails to hire qualified employees, or towards workplace trainings that don’t improve productivity, the system is not working as it should.

The goal of any HR department is to reduce cost and time spent on remedial tasks. They must do this all while improving strategic efforts. Measuring the impact of systems and processes can give a clear indication of cost efficiency.

Measuring success

As The Balance explained, measuring HR cost is a quantifiable way to demonstrate to leadership and C-level executives that current strategies are helping to improve business goals and company growth. Metrics such as cost-per-hire and the impact of recruitment on revenue are some of the best ways to establish the position as a value center. This can be done through showcasing high quality hires – employees who have made a measurable change in sales, revenue or elsewhere, as well.

If your current data doesn’t highlight metrics and success as a direct result of HR initiatives, it is time for to review your practices and find new methods. To evaluate, consider ranking the various factors of HR using key performance indicators, The Balance advised. These can serve as insightful benchmarks for modifying or revamping recruitment and hiring practices.

Predict future costs and calculate ROI

Planning and budgeting can only be achieved through accurate calculations of spend. This means that attention to detail when it comes to reporting, tracking, and measuring HR costs is essential for predicting future costs, the Society for Human Resource Management explained. Using advanced cost models is the advisable way to get accurate projections of upcoming program costs. This makes planning for the distribution of spend that much more effective.

Calculating overall ROI is the basis for evaluating the effectiveness of your HR department. Measuring ROI for individual strategies or platforms serves as an indicator for future investments. As such, all cost data must be credible, the SHRM emphasized. There needs to be a strong attention to detail when calculating indirect costs. Without accuracy, time and resources are squandered.

To effectively measure the aforementioned HR costs, it is essential that accurate record keeping is followed. Use cost evaluations to your advantage. As a result, be taken seriously by your executive team. They’ll see a valuable asset to growth and the bottom line.


  • WebberJ

    This is helpful for large companies, especially when you have to handle many people with so much difference in work attitude.


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