Revenue per Employee

Wendy Kelly
Wendy N. Kelly, MSHRM, PHR, SHRM-CP
Do you ever wonder if your organization is utilizing your employees efficiently? Are you unsure if or how to measure it? Let’s explore the Revenue Per Employee metric and how your organization can apply it to increase the bottom line.

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What Is Revenue Per Employee?

Revenue Per Employee  (RPE) is a measurement of how much revenue each employee generates for your organization.

Why Is It Important to Understand Revenue Per Employee?

RPE helps evaluate your employees’ efficiency and productivity. In addition, this ratio helps you evaluate historical changes within your organization.

Efficiency and productivity. The more efficient and productive your organization is, the less likely you are to experience losses (e.g., lack of profit, turnover) and more likely to experience an increase in profits, positive organizational culture, and retention. Increased profits allow organizations to expand their operations and improve the livelihood of its employees.

Historical changes. Understanding your organization’s past allows you to enhance its structure, operations, growth, and profitability. If RPE decreases over a period of time, you know that efficiency and productivity are declining, and can take action. Perhaps your hiring practices, training, or retention program need to be revised.

How to Calculate Revenue Per Employee

To calculate RPE, divide your organization’s total revenue by the current number of employees.

Revenue ÷ Current Employees

  • Learn total revenue. Find the total revenue your business generated for the calendar year (e.g., previous year).
  • Number of employees. Gather the total headcount of employees you had in the same calendar year as your annual revenue figure.

Example of RPE Calculation

ABC Corporation produces parts for microwaves. The finance team reports that ABC’s annual revenue was $800,000 last year, and during this period the company had a total of 400 employees.  Therefore:

RPE = $800,000/400 = $2,000 per employee

How to Apply Your Revenue Per Employee Number

The RPE metric is best used in comparison to other companies in the same industry, as well as in conjunction with other financial metrics such as an organization’s turnover rate. Locate other organizations’ RPEs in financial statements and annual reports, or look for benchmark reports online. Then apply it to improve operations and educate investors.

Utilizing the RPE ratio allows organizations to recognize organizational challenges and act to mitigate them, increasing overall productivity and increasing RPE.

Organizations may improve their RPE by implementing HR strategies that improve employees’ productivity, such as better use of technology, improving workplace conditions, enhancing training and development, or strengthening communication protocols.

Investor Education

If your organization relies on or is looking for investors, RPE can provide a snapshot of just how healthy (or not) your organization is when compared to others in similar industries.  While this ratio doesn’t tell the whole story, it is useful.

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Questions You’ve Asked Us About Revenue Per Employee

What is a good revenue per employee?
RPE varies from industry to industry, but higher ratios indicate greater productivity and hence greater profits.
What is the difference between revenue per employee and profit per employee?
RPE measures how much revenue each employee generates for your organization, or the productivity of your employees. On the other hand, profits per employee includes income and costs in the calculation, measuring how much profit each employee contributes over a given period of time.
Wendy Kelly
Wendy N. Kelly, MSHRM, PHR, SHRM-CP

Wendy is a HR professional with over 10 years of HR experience in education and health care, both in the private and non-profit sector. She is the owner of KHRServices, a full service HR management agency. She is also SHRM and HRCI certified, serves as a HRCI Ambassador, and voted 2021 Most Inclusive HR Influencer.

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