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How do you calculate headcount?

Why is knowing your headcount important?

What is an employee headcount report?

Benefits of headcount reporting

What is headcount

Headcount is the number of employees a business has working within the company at any given time.

Most often, headcount accounts for every employee, including all full-time, part-time, remote workers, temporary workers, and contract employees.

Human resource teams can use headcount to determine how many employees work in a specific location or department within the company. Businesses benefit from monitoring not just who each of their employees is but also how many employees they have. 

How do you calculate headcount?

To calculate headcount, employers or human resource professionals should aim to be as accurate as possible. The first step is to define whom the company considers a worker and determine if contract workers or temporary workers will be a part of the calculation.

The next step is to document all employees in a centralized headcount document. This document typically outlines each employee’s name, job title, department, where they work, and their hours worked. Employers can then use this information to determine productivity and overall workforce planning goals.

Finally, you need to make your calculation. The standard method for calculating full-time and part-time employee headcount is:

  • Full-time employees working 40 hours per week are counted as one worker
  • Part-time employees working 20 hours per week are counted as 0.5 worker

For example, say you have 100 employees—75 of which are full-time employees and 25 are part-time employees. In total, your headcount would be 87.5. Companies can customize their headcount process by calculating their full-time equivalent (FTE).

Why is knowing your headcount important?

Knowing your headcount metric provides valuable information to human resource professionals about the following:

  • Employee efficiency
  • Attrition and retention trends
  • Productivity levels within the business or a specific department
  • Workforce planning for the short- and long-term
  • Forecasting of workforce development
  • Management of training and development

What is an employee headcount report?

HR professionals calculate the number of people working for the company using an employee headcount report. Headcount reports enable organizations to have a better understanding of who is working for them and how well those employees meet their needs. 

Also known as an HR metrics report, this documentation typically includes the people working within the organization at a specific period of time, taking into consideration the following:

  • All new hires for the company
  • All terminations the company made within a specific time period
  • The existing and maintained workforce 

In the US, the Equal Employment Opportunity Commission (EEOC) typically requires an annual report that shows the company is hiring a diverse workforce. For this reason, these reports indicate employee demographics, including gender, race, ethnicity, and job classifications. Discrepancies in such reports—including employee classification—can make running payroll difficult and cause issues with external reporting and audits.

Benefits of headcount reporting

Headcount reporting helps companies understand whom they are hiring, how many employees they are hiring, and what goals they should create going forward. This reporting enables companies to make informed workforce planning decisions, such as whether or not the company needs to launch initiatives to increase or decrease their hiring efforts.

For large and scaling companies, headcount planning can offer key insights:

Ensuring workforce growth

Headcount may indicate a company’s overall workforce health. This aids in understanding the human capital available at the company and how well that investment is supporting the organization’s needs.

Minimizing the risk of overstaffing

Financial planning relies on ensuring employees are productive enough to meet operational goals while also minimizing labor costs when possible. Accurate headcount processes help to minimize the risk of overstaffing, which is costly.

Ensuring resource planning for staff

Organizations need to know if they should bring on new employees and how the company will pay those employees. What benefits and resources are available?

Meeting productivity goals

Headcount reporting enables team leaders to review their current workforce against their quarterly and annual goals to determine if they have enough workers to hit their targets. Based on their headcount data and productivity trends, they can project how many people they will need to complete a project in a set amount of time.

Making informed decisions for hiring, recruitment, and budgeting

The need to hire new employees, launch recruitment campaigns, and make other workforce planning decisions depends on the accuracy of headcount reports. If the reports identify a need to increase your workforce, consider hiring international employees.

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