There are so many ways to measure your employees’ contributions to the company: the quality of their work, their speed and accuracy, the appreciation they receive from colleagues and customers. But, if you want to make sure your business can sustain itself, you can’t overlook their impact on your financials, either.
One way to assess this all-important factor is to regularly monitor your average revenue per employee. This metric provides insight into the monetary value each employee generates, on average. Plenty of factors can influence revenue per employee, from stellar customer service to efficient field operations.
Revenue per employee gives HR leaders a useful look at how their teams are operating and where there are even better opportunities to invest in their human capital management (HCM). Here’s what you need to know about calculating this metric and how it impacts your company.
What is Revenue Per Employee?
Revenue per employee (RPE) measures how much money a company generates in proportion to its total headcount. If your business earns $1 million in revenue and you have 50 employees, for example, your RPE is $20,000. This number can quickly tell you the dollar value each employee, on average, brings to the table.
Since it’s an average metric, not an individual calculation, revenue per employee isn’t useful for comparing the output or efficiency of individual employees. At a high level, however, RPE gives you a sense of how efficient your organization is when it comes to generating revenue. A higher revenue per employee indicates greater efficiency. It can also help you identify areas where you may need to better invest in your employees or streamline processes.
According to Investopedia, two of the biggest factors impacting a company’s revenue per employee are:
- Employee turnover:High employee turnover rates can hurt RPE because it increases the ratio of spending to revenue. Companies usually need to invest employee resources into talent acquisitionthrough onboardingand knowledge sharing, and those productivity costs go up whenever turnover is on the rise.
- Startup status:Many startup companies have low RPE because they may be focused on developing their product and building market share over making a profit right now. Early-stage tech companies, for instance, can’t usually compete with longstanding manufacturing giants. With lower revenue returns, their RPE will inevitably be lower, even if their employees are doing a great job.
You can compare your revenue per employee year-over-year to see if your company is becoming more efficient over time. You can also compare your own RPE to other industry benchmarks, to see how your business stacks up and if there’s room for improvement in your HCM practices.
Why Should You Calculate RPE?
Calculating RPE gives you a comprehensive look at how productive your employees are. With RPE, you can get an idea of how effectively the company’s human capital is being used.
- Understand employee productivity:RPE is a great way to get an overall feel for how productive your employees are. If you see that the number is low or decreasing, it may be a sign that something needs to change—whether it’s investing in better training, streamlining processes, or rethinking the role of certain jobs in your company. On the flip side, a high revenue per employee ratio might show that employees are working quickly and efficiently to achieve key performance indicators (KPIs) and win you more revenue.
- Effectively allocate staffing resources:With RPE, you can spot departments or teams that may need more attention or suss out where reorganization could be beneficial. If your revenue per employee drops from one year to the next, it could be an indication that you need to shift workloads or reinvest in your staff. This financial metric can even help you gauge the effectiveness of training and development investments, too. If you try out a new training program and you see your RPE go up, it’s one sign of success.
- Identify opportunities to increase your human capital value:Your workers aren’t just an expense — they bring real value to your business. RPE calculations help you demonstrate that value to the rest of senior leadership, showing the impact employees make and why it’s important to invest in a strong human capital management strategy.
How to Calculate Revenue Per Employee
To calculate your company’s RPE, you need two numbers: a company’s total revenue for a given period, such as a month or quarter, and the number of employees working at that time. Divide revenue by the employee count to get your RPE.
Here’s what that revenue per employee formula looks like:
RPE = total revenue / total number of employees
For example, if your technology company has 100 employees and generates $5 million in revenue for the month of June, the revenue per employee calculation would look like this:
$5,000,000 / 100 employees = $50,000
This number could change from month to month depending on how well you’re hitting your revenue goals and if employee headcount fluctuates. Calculating revenue per employee on a regular basis can give you an idea of whether your team is making progress and how well they’re doing with the resources available to them.
Once you’ve determined your RPE, you can break it down further by cost center or job title to get a better sense of the efficiency of specific departments or roles. This data can inform your decision-making when it comes to budgeting, hiring, and training.
Revenue Per Employee Benchmarks
Revenue per employee varies by industry, so it’s important to benchmark your results against peers in the same sector. For instance, investment services tend to have higher RPE than manufacturing companies because they require fewer employees and deliver more revenue.
Here are the 10 industries with the highest average RPE as of Q3 2022, according to CSI Market:
- Energy ($3,737,787.43)
- Utilities ($3,107,114.89)
- Financial ($1,031,196.90)
- Retail ($882,876.12)
- Basic Materials ($876,548.54)
- Healthcare ($725,995.36)
- Consumer Non Cyclical ($669,792.43)
- Consumer Discretionary ($609,591.55)
- Capital Goods ($591,640.63)
- Technology ($522,967.85)
Company size will also make a difference when benchmarking. A small business can’t compare itself to an enterprise company. SaaS companies that make less than $1 million in annual recurring revenue see a median RPE of $30,177. But larger companies that can balance higher labor costs with more than $20 million in annual revenue have a median RPE of $176,678,according to SaaS Capital.
Don’t Lose Sight of Growth and Retention
Leveraging human capital to generate more revenue is all about helping your employees thrive — which means showing how much you value them, too.
About 2 out of 5 U.S. employees don’t feel cared for at work, according to MetLife’s Employee Benefit Trends Study. But employee recognition programs, effective and supportive leadership, and opportunities for career development can drive vital workforce engagement.
A carefully constructed total rewards package can also reduce stress and lead to greater levels of productivity and engagement. Consider a financial wellness program, for example, to help employees ease their own financial strains and find some solid footing. Or introduce cooking demos and consultations to make healthy eatingmore accessible in your workplace.
Your employees, after all, aren’t just numbers on a spreadsheet. They’re crucial players in helping the company reach goals and achieve growth. It’s important they have the resources to stay happy, healthy, and refreshed. Speak to one of our wellbeing specialists about building the right plan for your workforce!
- Kenton, Will. (November 23, 2020.) Revenue Per Employee: Definition and Factors That Affect It. Investopedia. Retrieved March 21, 2023 from https://www.investopedia.com/terms/r/revenueperemployee.asp
- Wiggins, Perry D. (October 5, 2022.) How Much Revenue Should Each Employee Generate? Metric of the Month. CFO.com. Retrieved March 21, 2023 from https://www.cfo.com/strategy/2022/10/business-entity-revenue-per-employee-benchmarking-kpi-labor-market/
- Revenue Per Employee Screening as of Q3 of 2022. CSI Market. Retrieved March 21, 2023 from https://csimarket.com/screening/index.php?s=ree
- Perry, Nick. (November 30, 2022.) 2022 Revenue Per Employee Benchmarks for Private SaaS Companies. SaaS Capital. Retrieved March 21, 2023 from https://www.saas-capital.com/blog-posts/revenue-per-employee-benchmarks-for-private-saas-companies/
- MetLife’s 21st Annual U.S. Employee Benefit Trends Study 2023. MetLife. Retrieved March 21, 2023 from https://www.metlife.com/content/dam/metlifecom/us/noindex/pdf/ebts-2023/MetLife_EBTS_2023.pdf
The Gympass Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.