HR: How much is too much — or too little?

August 09, 2023

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We measured HR staffing and found a possible relationship to employee turnover.

The unsung offices of human resources toil with little recognition, but their role couldn’t be more important. HR divisions recruit talent, manage training and development, ensure compliance, and make sure everyone gets paid. And that’s just for starters.

To execute these responsibilities effectively, employers require a minimum level of HR staffing. The “right” level can vary by industry, company size, and boom-and-bust labor market cycles.

In tight labor markets, organizations will bulk up their HR offices with recruiters and other specialists to gain an advantage in the pursuit of talent. HR divisions might shrink when labor demand cools.

We wondered whether HR offices were growing or shrinking, and whether beefed-up HR staffing has an effect on employee turnover. To find out, we use ADP data to look at HR staffing levels going back to 2018. We then plotted HR staffing against employee turnover.

We found that HR personnel counts, when measured as a share of total staffing, are up more than 10 percent since 2018. We also found evidence that might suggest that HR staffing can affect employee turnover.

To make our observations, we calculated an HR staffing ratio, defined as the number of HR personnel for every 100 employees. In short, the HR staffing ratio shows what share of an employer’s payroll is devoted to HR functions. We then looked at how staffing ratios vary by employer headcount and industry.

Here’s what we found. Only have a minute? Skip to the takeaways.

The takeaways

Want to dive deeper into our findings? Return to the data story.

  • HR staffing is rising in today’s hot labor market. Demand for workers boils over as the economy continues to recover from the coronavirus pandemic. Against that backdrop, it’s no surprise that HR staffing ratios have grown more than 10 percent since 2018.
  • Labor market fluctuations affect some industries — and their HR staffing ratios — more than others. Low-wage workers have gained the most from the post-pandemic hiring boom. HR staffing ratios, likewise, have grown the fastest in industries with a large, low-wage frontline workforce. That growth has exceeded HR staffing even in white-collar industries, which tend to have higher HR staffing ratios.
  • HR isn’t just for large employers. Companies with fewer than 50 workers can average more than two HR staff members. While HR staffing ratios grew faster and more steadily for larger companies between 2018 and 2023, HR staffing ratios at the smallest employers are up 3.8 percent since 2018.
  • Recruiters make up the largest share of HR staffers, but their dominance fades as hiring cools. As U.S. demand for workers rises, so does demand for recruiters, as organizations work to attract talent. The result: recruiters as a share of HR staff grew over 26 percent from 2018 through April 2023. Yet the year-over-year growth in that share dropped from 11 percent to less than 1 percent between 2022 and 2023. At the same time, the U.S. hiring rate dropped from 4.3 percent in April 2022 to 3.9 percent a year later, according to the Bureau of Labor Statistics1U.S. Bureau of Labor Statistics, Hires: Total Nonfarm [JTSHIR], Rate, Seasonally adjusted; retrieved from FRED, Federal Reserve Bank of St. Louis August 2, 2023..
  • Employers that expand their HR ranks might reduce employee turnover, but only to a point. While we need to do more research to determine whether the relationship between HR staffing and turnover is causal, evidence so far suggests that reduced HR staffing is accompanied by high employee turnover. That return on increased HR staffing diminishes after a point, however.