External Hire Rate

Application

This measure will be most useful for organizations that wish to monitor “churn” of the workforce, the rate at which new employees are entering the organization, and hiring volume as an outcome of recruitment activities.

Description

External hires as a percentage of average headcount during the reporting period.

Formula

External Hires / Average Headcount * 100

Interpretation

External Hire Rate measures the percentage of the current workforce hired from external sources within the reported period, indicating both the relative newness of an organization’s workforce and the relative volume of recruiting activity of the staffing function. When paired in analysis with Termination Rate, an organization can monitor the churn of the workforce, or the extent to which certain populations are passing through a revolving door of employment with the organization.

A very low figure may indicate low turnover or contraction of the workforce. A very low level of new entrants into the employer’s workforce can also potentially foster insularity, thereby inhibiting innovation and creating a stagnancy of skills and ideas.

A very high External Hire Rate may indicate expansion of the workforce or high turnover. Generally, organizations will always have some external recruitment activity, which is beneficial for the fostering and growth of new ideas. However, high levels of external recruitment reflect large costs to the organization, including the direct costs of hiring as well as the indirect costs of productivity ramp-up and dilution of company culture.