What is HR analytics?

Organizations are increasingly recognizing the power of data in shaping business strategy, and human resources is no exception. As today’s work environments evolve rapidly, making informed decisions about hiring, engagement, and retention is more important than ever. Just over 70 percent of HR leaders now see analytics as a key part of their strategy. 

HR analytics is changing how organizations make decisions about their people. Armed with the right data and actionable insights, HR teams can improve productivity, reduce turnover, and plan effectively for the future. Rather than relying on instinct alone, companies are leveraging data-driven insights to build stronger, more resilient teams.

In this article, we’ll explore what HR analytics is, how it works, and the key metrics and practices that make it effective.

What is HR analytics?

HR analytics is the process of collecting, analyzing, and interpreting HR data to support informed and intelligent business decisions. This process enables organizations to understand workforce dynamics, optimize HR practices, and align talent strategies with overarching business objectives. Companies can leverage HR analytics to enhance employee engagement, improve retention rates, and boost overall organizational performance.

HR analytics vs. people analytics

The terms HR analytics and people analytics are often used interchangeably, but they’re not quite the same. HR analytics focuses on evaluating data specific to HR functions, like recruitment, performance, and compensation management. Its aim is to streamline HR operations and improve processes within the HR domain.

People analytics, or talent analytics, casts a wider net. It brings together data from multiple sources—HR software, team member surveys, and even external platforms like learning management systems—to paint a more comprehensive picture of workforce trends. This broader approach helps organizations understand behaviors, forecast outcomes, and foster a stronger connection between people and business goals. While both offer valuable insights, people analytics goes beyond HR’s traditional boundaries to examine the entire employee lifecycle. 

HRIS vs. HR analytics

An HRIS (human resource information system) and HR analytics are closely linked. An HRIS is software designed to store and manage employee data—like personal details, job history, payroll, and benefits. It’s the foundation for keeping HR information organized and accessible.

HR analytics is how human resources teams make sense of that data. It involves interpreting the information stored in HR software to uncover trends, solve challenges, and guide HR decision-making. While the HRIS is the tool that holds the data, HR analytics turns that data into actionable insights. Together, they offer a powerful combination for shaping strategies and driving smarter business decisions.

The importance of HR analytics

HR analytics provides the key to unlocking effective HR strategies, enabling HR professionals to identify successful practices and pinpoint areas for adjustment. Analytics enables HR professionals to make data-driven decisions to:

• Reduce turnover
• Provide competitive pay
• Boost performance
• Improve workforce planning  
• Reduce costs and increase profit

<<Access this free HR strategy & business alignment workbook.>>

What are HR analytics tools?

In today’s tech landscape, HR analytics relies on software and tools to automate and streamline the analytics process. Data scientists also play a crucial role in organizing the information into a clear, presentable format for HR professionals. 

HR analytics needs accurate and comprehensive internal and external data to be effective. Internal data refers to information from the HR department, such as records and metrics connected to team member compensation and performance appraisals.

External data consists of information from other departments or outside the organization, such as financial data, economic trends, or job-market research. There are many different HR analytics software and tools. 

Different HR software tools offer different benefits, so it’s important to consider how they will fuse with your current solutions and enable data-driven decisions on how to improve engagement and satisfaction, reduce attrition, and improve your cost per hire, workforce diversity, and close pay gaps.

Types of HR analytics

HR analytics can be broken down into four types, each offering unique insights into your workforce. Together, they help HR teams understand what’s happening so they can plan and act with confidence.

Descriptive

Descriptive analytics is about understanding what’s already happened. It summarizes historical data to answer straightforward questions like, “What’s our current turnover rate?” or “How many new team members joined last year?” Descriptive analytics present a clear snapshot of past trends to help teams see patterns and establish a baseline for future analysis.

Diagnostic

Diagnostic analytics helps you figure out the “why” behind the numbers. If turnover spikes, diagnostic analytics can highlight the causes, whether it’s poor compensation, lack of development opportunities, or inefficient team dynamics. Think of it as a tool for identifying challenges so you can take informed, meaningful action to address them.

Predictive

While HR professionals must make critical decisions during the analytics process, they aren’t alone. Enter predictive HR analytics, a tool that guides better decision-making based on past and current practices. Using predictive analytics, HR can reduce human error and risk while forecasting probable, upcoming trends. HR analytics tools can enhance HR software to elevate engagement, talent acquisition, and learning and development opportunities.

Prescriptive

Prescriptive analytics doesn’t stop at predicting what might happen; it also suggests actions you can take to achieve the best possible outcomes. For example, if predictive analytics identifies a potential drop in employee engagement, prescriptive analytics might recommend solutions like the hybrid working model, recognition programs, or team-building initiatives.

When combined, predictive and prescriptive analytics are a powerful duo. They give HR leaders the tools to anticipate challenges and take proactive steps to tackle them. From retention strategies to workforce planning, this combination ensures HR drives meaningful, positive change rather than reacting to trends.

Key HR analytics metrics

Typically, human resources teams use essential HR metric data for HR analytics, including:

• Time-to-hire: This metric measures how long it takes for a candidate to move from application to offer acceptance. It’s a great way to see how efficient your hiring process is and whether adjustments might be needed to attract and secure top talent faster.
• Time-to-fill: Time-to-fill focuses on the entire hiring process, from posting a job to onboarding a new hire. It helps you evaluate how smoothly your recruitment strategy works and identifies any delays that could be slowing things down.
• Revenue per employee: This metric shows the average revenue each person generates by dividing total revenue by the number of people on your team. It’s a clear way to gauge overall productivity and the impact of your people on the organization’s financial performance.
• Training expense per team member: This metric looks at how much you invest in learning and development for each team member. It’s a helpful measure for assessing the value and effectiveness of training programs.
• Offer acceptance rate: Offer acceptance rate tells you how many candidates accept job offers compared to the total number of offers made. A high rate suggests your compensation strategy, employer branding, and candidate experience are helping you attract talent.
• Voluntary turnover rate: This metric tracks the percentage of team members who leave the organization by choice. It’s a key indicator of how satisfied and engaged your people are and whether your retention strategies are working.
• Involuntary turnover rate: This metric tracks the percentage of team members who leave the organization due to employer-driven decisions, such as layoffs or terminations. It helps assess workforce stability, hiring effectiveness, and the impact of business or performance-related changes.
• Absenteeism rate: Absenteeism rate measures how often team members are away from work without notice. It can highlight areas where workplace conditions, engagement, or wellbeing might need attention.
• Human capital risk: This metric assesses potential risks related to your workforce, like skill shortages or gaps in succession planning. It gives you the insights needed to stay ahead of challenges and maintain a resilient team.
• Employee net promoter score (eNPS): eNPS measures how likely your people are to recommend your organization as a great place to work. It’s a simple yet powerful way to gauge overall satisfaction and loyalty.
• Cost-per-hire: Cost-per-hire breaks down the expenses involved in bringing new talent on board, like advertising, recruitment tools, and onboarding costs. It helps you understand the financial efficiency of your hiring process.
• Diversity metrics: This tracks the representation of different demographics within your workforce, such as gender, ethnicity, age, and disability status. It helps assess the effectiveness of diversity, equity, inclusion, and belonging (DEI&B) initiatives and identify areas for improvement in hiring, retention, and career advancement.

<<Keep track of vital metrics with free HR report templates.>>

Examples of how companies use HR analytics

To better understand how HR analytics works in practice, let’s explore how it applies specifically to some of the key metrics listed above. 

1. Absenteeism rate

A manufacturing company measures its absenteeism rate and discovers that it’s unreasonably high. Using the analytics process, HR leaders can collect data on team member absenteeism and tardiness. Analyzing the data helps them identify negative patterns, effective strategies, and methods to get their people excited about coming to work. Then, the company can make informed decisions about how to reduce absenteeism, perhaps through adjusting management practices, changing work policies to support better work-life balance, or raising compensation for certain positions. 

2. Time to hire

A software development company has dozens of job openings. The HR analytics team gathers data to determine how long it takes the company to hire someone, from the day you start advertising the job until the day a candidate accepts the position. With this information, HR leaders can identify which positions take the longest to fill and why. HR can evaluate factors such as advertising methods, recruitment strategies, and compensation and benefits to determine how to reduce time-to-hire.

3. Voluntary turnover rate

People are voluntarily leaving a marketing company. Calculating the voluntary turnover rate gives HR the numbers they need to understand better why people are quitting. With the voluntary turnover rate calculations, HR can discuss the numbers with the company executives to determine how to reduce turnover.

HR analytics implementation best practices

Incorporating the following practices can pave a smooth path for effective integration of HR analytics:

• Set clear desired outcomes. Start by defining what success looks like for your organization. Are you aiming to lower turnover, improve workforce planning, or enhance engagement? Be specific about the goals you want to achieve. This clarity creates a solid foundation for your analytics efforts and keeps your focus on what matters most.
• Create a plan. After determining the issues to focus on, rank the most pressing ones first. Include a detailed breakdown of the HR functions and how to adjust them to overcome the company’s business challenges. Identify metrics to drive results and elevate these HR processes to reach long-term goals.
• Choose what type of data you need. Think about the data that will help answer your key questions. For instance, if retention is a priority, you might focus on metrics like voluntary turnover rate or eNPS. If recruitment is your focus, look at data related to time-to-hire or cost-per-hire. Selecting relevant data ensures your analysis directly supports your goals.
• Involve data scientists. Welcoming data scientists into the process enhances HR analytics. Data scientists can monitor the quality and accuracy of the data while helping HR professionals understand the information and implement it strategically. With well-organized and clearly displayed information, HR leaders easily share the information with stakeholders to promote an agenda. 
• Turn HR analytics into actionable insights. Numbers alone won’t drive change—action will. Once you’ve identified trends or challenges, use the insights to create strategies that address them. For example, if analytics show a rise in absenteeism, consider initiatives like flexible scheduling or wellbeing programs to tackle the issue head-on. 
• Prepare HR personnel. Request that HR team members evaluate how influential the role of HR analytics is in developing the company’s business strategy. Once they cultivate an awareness of their standing and determine what they need to do to reach the next level, they can take steps to progress. 
• Educate HR professionals. Analytics brings an abundance of AI that challenges the status quo at work, so HR professionals must educate themselves about developing technological trends. HR leaders can help HR generalists and business partners adapt to digital transformation by facilitating professional development opportunities. 

Ensure legal compliance. It’s up to HR to ensure managers, executives, individual contributors, and other HR team members understand the importance of complying with local and national labor and privacy laws. Be transparent concerning the type and amount of data the company collects. HR leaders can consult a specialist in employment law to assist them in following regulations and implementing bylaws.

How real-life companies use HR analytics

HR analytics is more than just a tool—it’s a way to better understand people and processes. Many companies have adopted analytics to solve challenges, improve engagement, and make smarter decisions. Let’s look at how organizations are using data to create meaningful change.

1. The Energy Collective

The Energy Collective, a global retail energy and technology business that sells electricity and broadband using proprietary data analysis technology, was concerned that its rapid growth might negatively impact its company culture. They still managed their people and HR data with spreadsheets and emails, but they wanted to find an HR platform that would help them nurture their caring and fun culture.

The company replaced those spreadsheets with Bob’s People Analytics to gain real-time data insights. Now, the Energy Collective can easily pull and analyze important data (like gender pay gap or salary average) and use their findings to develop solutions that will help them maintain their amazing workplace experience. 

2. Airtasker

When Airtasker, a publicly-traded online marketplace for outsourcing tasks and local services, sought a better way to manage their people data, they turned to analytics. Using Bob’s People Analytics, Airtasker streamlined its processes and improved performance tracking. They revolutionized how their chief human resources officer (CHRO) prepared and shared data for monthly board meetings using a visual dashboard with clear, real-time data.

With this data at their fingertips, they have the tools they need to enhance team satisfaction and decision-making. Airtasker strengthened its people strategy and built a more cohesive workforce by focusing on data-driven insights.

3. Google

Google has long been a leader in leveraging HR analytics. One of their standout initiatives, Project Oxygen, used data to uncover what makes a great manager. The findings led to tailored training programs and actionable changes that improved management practices. Google’s ability to combine analytics with innovation helps them align workforce strategies with business goals.

4. Under Armour

Under Armour uses HR analytics to refine its approach to hiring and retention. They used workforce analytics to identify the causes of high turnover and implement targeted solutions. This included optimizing their recruitment strategies and introducing retention programs tailored to their teams. Their focus on analytics has helped them attract and keep top talent while fostering a more stable workforce.

5. E.ON

E.ON has embraced HR analytics to support diversity and improve team member engagement. Analyzing demographic data helped them develop initiatives to enhance representation across different groups. They also used workforce insights to create programs that aligned with their teams’ needs, from leadership development to engagement strategies. E.ON’s data-driven approach has helped them build a more inclusive and energized workplace.

Make HR analytics part of your modern HR strategy

As technology continues to transform the workplace, HR analytics empowers organizations to navigate change with confidence. HR leaders who leverage data-driven insights can make smarter decisions that enhance talent management, optimize workforce planning, and drive business success.

With the right analytics tools, HR teams can proactively address challenges like attrition, engagement, and productivity to create a more positive team member experience and a stronger company culture. When people data is integrated into decision-making, organizations can improve retention and performance while building a workplace where team members feel valued, supported, and motivated to grow.

<<Streamline your HR analytics with free HR report templates.>>

HR analytics FAQs

What is the difference between HR analytics and HR reporting?

HR reporting is about presenting data. It answers questions like, “How many people left the company this year?” or “What’s our current headcount?” It’s focused on compiling metrics and giving you a clear snapshot of what’s happening within your organization.

HR analytics takes this process further by interpreting that data. It digs into the “why” behind the numbers and helps you explore trends, patterns, and solutions. For instance, if HR reporting demonstrates a decline in engagement, HR analytics identifies the reasons, whether it’s workload imbalance, limited recognition, or ineffective management practices. Think of HR reporting as the foundation, and HR analytics as the tool that builds on it to drive better decision-making.

How can HR analytics improve decision-making?

HR analytics helps you understand what’s working and what isn’t so you can focus on what matters most. For example, if your analytics show high absenteeism in a specific department, you can investigate the root cause and take steps to address it, such as adjusting workloads or introducing employee wellness programs.

It also helps you predict outcomes. If you’re planning a hiring push, analytics can forecast how long it might take to fill certain roles based on past trends. This allows you to plan ahead and allocate resources effectively. Ultimately, HR analytics ensures your decisions are grounded in facts, not assumptions, giving you confidence in your strategy.

What metrics matter most in HR analytics?

The most important HR metrics depend on your goals, but several stand out for most organizations:

• Turnover rate
• Time to hire
• Employee net promoter score (eNPS)
• Cost-per-hire
• Absenteeism rate
• Diversity metrics

The right data can help organizations make informed decisions that enhance both the employee experience and business outcomes.

What skills and certifications are required for HR analytics?

HR analytics requires a mix of technical skills, HR expertise, and a knack for problem-solving. Here’s what matters most:

• Data analysis skills: Interpreting data and identifying trends helps turn numbers into meaningful insights. Familiarity with tools like Excel, Tableau, or SQL can enhance efficiency.
• Critical thinking: Making connections between data points and real-world challenges leads to more effective solutions.
• Communication skills: Presenting insights in a clear, actionable way ensures stakeholders can confidently apply data-driven decisions.
• HR knowledge: Understanding recruitment, retention, and performance management provides context for analyzing workforce trends.
• Technology proficiency: Experience with HR systems and analytics platforms helps maximize the value of available tools.

HRIS certifications can also boost your expertise by providing in-depth knowledge and hands-on training. These certifications show you’re ready to tackle analytics with confidence and align your work with business goals.