HR Metrics and Financials Flashcards

A company's HR cost ratio is calculated as total HR department costs divided by total revenue. If HR costs are $2M and revenue is $40M, what is the HR cost ratio?

Answer: 5%

HR cost ratio = ($2,000,000 / $40,000,000) × 100 = 5%.

In HR analytics, a 'leading indicator' differs from a 'lagging indicator' in that it:

Answer: Predicts future trends before they become problems

Leading indicators are predictive measures (e.g., engagement scores) that can signal future outcomes before they materialize.

Which scenario best illustrates the use of predictive HR analytics?

Answer: Using engagement and tenure data to identify employees likely to resign

Predictive analytics uses existing data patterns (engagement, tenure) to forecast future behavior such as flight risk.

What does a compa-ratio of 0.85 indicate about an employee's compensation?

Answer: The employee is paid 15% below the salary range midpoint

A compa-ratio below 1.0 means the employee's pay is below the salary range midpoint; 0.85 indicates 15% below the midpoint.

An HR department uses a 'staffing ratio' metric. This metric compares:

Answer: Number of HR staff to total employees served

HR staffing ratio = total number of HR employees / total organizational headcount, measuring HR capacity relative to workforce size.

Which financial statement would an HR professional most likely analyze to understand labor cost trends over time?

Answer: Income statement (profit and loss)

The income statement (P&L) shows revenue and expenses including labor costs, making it the primary tool for analyzing compensation and benefit expenditure trends.

During a workforce planning session, HR identifies a projected labor surplus in two years. The most financially prudent short-term response is to:

Answer: Implement a hiring freeze and natural attrition management

A hiring freeze combined with natural attrition allows workforce levels to gradually decline without the costs and morale impacts of immediate layoffs.