Understanding revenue per employee
Revenue per employee measures how much revenue each employee generates on average. It's a key productivity metric that helps organisations understand workforce efficiency, compare against competitors, and identify opportunities for improvement. Higher RPE generally indicates better utilisation of human resources.
What it measures
- Workforce productivity
- Operational efficiency
- Resource utilisation
- Business scalability
Why it matters
- Benchmarking performance
- Staffing decisions
- Investment planning
- Growth capacity
Calculating revenue per employee
The basic formula and considerations:
RPE calculation
RPE = Total Revenue ÷ Average FTE Employees
Example: $5,000,000 ÷ 40 FTE = $125,000 per employee
Key considerations:
- Use FTE to account for part-time workers
- Include contractors if they contribute to revenue
- Use average headcount for the period (not point-in-time)
- Be consistent with methodology over time
Industry benchmarks
- Technology: $200,000 - $500,000+ (high automation)
- Professional services: $100,000 - $300,000
- Manufacturing: $100,000 - $250,000
- Retail: $80,000 - $150,000
- Hospitality: $50,000 - $120,000 (labour-intensive)
- Healthcare: $80,000 - $200,000
Compare within your industry
RPE varies enormously by industry due to different business models, automation levels, and labour intensity. A $100,000 RPE might be excellent in hospitality but poor in technology. Always benchmark against relevant comparisons.
Improving revenue per employee
Increase revenue
- Grow sales volume
- Improve pricing
- Expand services/products
- Enter new markets
Improve efficiency
- Automate processes
- Invest in technology
- Train and develop staff
- Optimise staffing levels
Limitations of RPE
Ignores profitability
High revenue per employee doesn't mean high profit. A company could have high RPE but thin margins. Consider alongside profit metrics.
Industry variation
Business models differ. Comparing a software company's RPE to a restaurant's is meaningless. Only benchmark within your industry.
Can encourage understaffing
Optimising for RPE alone might lead to understaffing, burnout, and poor customer service. Balance efficiency with service quality and employee wellbeing.
Key takeaways
Revenue per employee measures workforce productivity by dividing total revenue by employee count. It's useful for benchmarking, tracking improvement, and informing staffing decisions. Compare within your industry, consider alongside profit metrics, and don't optimise for RPE at the expense of service quality or employee wellbeing.
RosterElf's staff management helps Australian businesses optimise staffing levels and track productivity with efficient rostering and time tracking tools.
