Net Hire Ratio is a must-have recruiting metric in a data-driven HR culture. This guide will tell you everything you need to know about Net Hire ratio and provide some best practice advice.
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What is Net Hire Ratio?
Net Hire Ratio represents the number of new hires for every termination in the reporting period. In other words, it shows the total net growth or loss of employee headcount for a given period. For example, a Net Hire Ratio of 1.2 means that the organization hired 120 recruits for every 100 departed employees during a reporting period.
If Net Hire Ratio is greater than 1, it means that the workforce has grown in size.
If Net Hire Ratio is equal to 1, it means that the workforce size stays the same.
If Net Hire Ratio is less than 1, it means the workforce shrank.
Why Measure Net Hire Ratio
Net Hire Ratio is the most accurate way to tell if your workforce is growing or shrinking. Whereas Headcount reporting provides a snapshot of the workforce size in time, Net Hire Ratio takes into consideration changes from both hiring and turnover activities. It also shows the direction and the rate at which the workforce is growing or shrinking. HR can also use Net Hire Ratio along with Cost per Hire as indicators of the need to increase recruiting efforts, resources, and/or hiring activity, as well as an indicator of the need to reduce uncontrolled voluntary turnover. Organizations should have a Net Hire Ratio target that aligns with their talent strategy, whether it is expansion or reduction. In either case, we recommend HR track and compare historical Net Hire Ratio trends with the Total Cost of Workforce change rates to quickly spot any irregular workforce trends.
How to Calculate Net Hire Ratio
Definition: Comparison of new hires to terminations, showing the net growth at the organization for a given period.