Headcount Reporting: Benefits and 7 Best Practices for HR
If organizations want to understand their workforce dynamics and engage in effective workforce planning, they need to have an overview of their headcount numbers. Although headcount reporting is meant to be a simple process with a concrete outcome, it rarely ends up being as straightforward as it should be due to discrepancies across departments. So, let’s dive into everything you need to know about headcount reporting.
What is headcount reporting?
Headcount reporting is a collection of data used to gain an accurate understanding of the total number of people in an organization at any given time. It enables you to categorize those employees based on various quantitative and qualitative information. That can provide valuable insights for business planning and projection and improve the efficiency of an organization.
A typical headcount report will usually include information on every employee relating to:
- Job status (active or inactive)
- Job title
- Schedule status (part-time, full-time, contract)
- Time in role / tenure
- Exemption status (exempt or non-exempt from receiving overtime pay)
- Education level
- Retirement age
- Veteran status
This headcount data will usually come from your Human Resources Information System (HRIS). This HR software helps manage and process all of this information—along with HR policies and procedures—and condense it into one single source of truth.
Why is headcount reporting important?
For mid-to-large-sized organizations with hundreds or thousands of employees, measuring headcount matters. Here’s why.
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Providing a base for workforce planning decisions
If your organization has particular workforce goals relating to growth, redistribution of labor, diversification, internal promotions, or new hires, headcount reports can guide your workforce planning decisions. You can avoid overstaffing, achieve optimal headcount, potentially reduce labor costs, and maximize the efficiency of your overall HR strategy.
Organizations have obligations they must uphold depending on the number of full-time employees they have. For example, under the Equal Employment Opportunity Commission (EEOC) guidelines, businesses with more than 100 employees must perform demographic reporting. The aim is to demonstrate a clear effort to diversify their workforce and provide fair opportunities for employment to underrepresented groups of the population.
If a business has more than 50 full-time employees, they are also required to provide their employees with health care benefits, in addition to job-protected medical and family leave. Therefore, staying on top of your headcount and ensuring this number is accurate is crucial if you want to avoid hefty penalties for being non-compliant.
Headcount reporting is also useful when an organization is making changes to its budget and needs to consider how these financial planning decisions will affect pay rises, department allowances, insurance premiums, and more. HR and business leaders can work together to make budget decisions based on accurate, real-time metrics.
Employee headcount reporting best practices
1. Ensure consistent employee classification
To ensure your headcount reporting is accurate, it’s vital to determine who you classify as workers. Do they need to be full-time, or are you including part-time, seasonal, and temporary employees in your report? Who is classified as exempt and non-exempt under the Fair Labor Standards Act?
Ensure all departments across the organization are on the same page and collaborate to achieve a universal headcount. Our guide on employee classification and the flowchart below provide an overview of different types of employees:
2. Manage employee data responsibly
Due to the sensitive nature of qualitative data obtained about individual employees at your organization, all headcount data must be handled with confidentiality and a level of responsibility when it comes to internal and external reporting.
Here are some things you can do to ensure responsible employee data collection:
- Develop and follow formal procedures that comply with recordkeeping laws.
- Make sure your security systems are up-to-date and regularly review your data security.
- Limit access to the data and keep a monitored access log.
- Investigate all incidents and unauthorized access.
3. Determine short- and long-term objectives
Outline your goals as an organization before you get started to steer your headcount report in the right direction. For example, let’s say you wanted to assess the salaries of all the people currently in your IT department. A headcount report of all your IT employees broken down into different categories will provide HR and managers with a greater understanding of the budget and workforce.
Also, you might find out that 40% of your workforce will be retiring in the next 10 years. You can start planning the knowledge transfer, training, and recruitment strategy for the following decade already.
In a word, aligning your headcount objectives with your long-term business strategy can help you address both compensation and labor trends.
4. Create a headcount reporting dashboard
A real-time dashboard will provide an accurate overview of your workforce. It will give you access to key headcount reporting metrics at your fingertips. Make sure this is a dynamic record instead of an annual or bi-annual headcount report that doesn’t allow for fast decision-making and action. HR professionals and managers need to be able to access concrete data to make informed workforce decisions.
Your headcount reporting dashboard should be centralized and accessible by all departments in your organization, including your leadership team. They should be able to refer to it as and when needed.
Below, you can see examples of headcount reporting dashboards created in Tableau (1 and 2) and Power BI (3).
Headcount reporting dashboard example 1
Headcount reporting dashboard example 2
Headcount reporting dashboard example 3
5. Show the bottom-line impact
There is often a disconnect between HR and business leaders regarding data, reports, and trends. HR teams will often focus on isolated headcount metrics or numbers rather than what those numbers mean from a business perspective. It’s important to link performance with business outcomes in your headcount reports rather than share a list of items that represent very little on their own.
What impact do changes in headcount have on the bottom line? Headcount reporting can help you determine the Total Cost of Workforce (TCOW) as well as Revenue per Employee. Therefore, you can assess the financial impact the number of employees has on your organization and how potential decisions will impact the company in the future.
It’s also common to focus on the net change in headcount over a set period. However, this offers no visibility into how many new employees you have who are still figuring out their role, which can create a false sense of security. Therefore, instead of solely looking at the overall net change, focus on the movement of people in your organization, both in and out. This allows you to put your headcount metrics in a suitable context. Then, you can use them as a solid foundation for making key hiring decisions.
6. Use the data to make projections
A headcount reporting dashboard will give you a solid picture of the past, but if you’re only looking at the past, you will always be one step behind. Rather than fighting fires as and when they arise, be proactive and take measures to prevent those fires from happening at all.
Use the headcount data you collect, along with news of emerging trends, to forecast what will happen over the coming weeks, months, and years and the impact on the business.
Business leaders want to know what’s going to happen next year. That gives them time to plan, strategize and act promptly. For example, leaders should be aware of a shortage of critical roles long before this has a visible impact, such as a miss in a major production deadline or a reduction in your repeat customer numbers.
Headcount reporting can provide projections based on the future impact on revenue, productivity, and customer satisfaction, enabling leaders and stakeholders to take action.
7. Combine headcount with other metrics to get better insights into your workforce dynamics
Headcount reporting allows you to calculate more than your organization’s headcount, including employee turnover and retention rates. Metrics like these help you understand how your workforce is developing. Then you can plan the steps you need to take to achieve optimal productivity and performance.
HR teams must ask themselves which other metrics can help strategically leverage the headcount metric. For example, attrition rates and bench strength, as well as headcount, could help you gain a clearer sense of your organization’s workforce dynamics.
When presented on its own, headcount is just another number. But when coupled with other tangible metrics that tell a compelling story about your workforce and relate to business operations, it becomes incredibly powerful.
A final word
Accurate headcount reporting will give you valuable, real-time insights into the number of employees you have, how this changes over time, and the type of employees in your organization. To sum up, it is a robust tool for evidence-based HR, helping your organization make data-driven decisions now and in the future.