What is a headcount report & how does it impact your business?

A headcount report is a type of HR report used to calculate how many employees you have at any given time. Aside from being a requirement established by the Equal Employment Opportunity Commission (EEOC), headcount reporting helps you keep track of the evolution of your retention and turnover rates. It also helps with workforce planning so that you can ensure that all your operations run as smoothly as possible.

Creating an employee headcount report is generally a fairly straightforward process. However, discrepancies relating to employee classifications and how data is collected can sometimes confuse matters. That’s why it’s so important to establish clear standards and guidelines for how you conduct your headcount reporting.

Let’s take a look at everything you need to keep in mind to help you create a well-defined headcount reporting process.

What is a headcount report?

An employee headcount report is a type of HR metrics report that helps you keep track of how many people are working at your organization at any given time. It takes into account new hires, terminations, and your existing workforce You can then use this data to better plan your staffing requirements, gain valuable insights for business projections, and improve the overall efficiency of your organization.

Headcount reporting also helps you stay compliant with requirements established by the Equal Employment Opportunity Commission (EEOC). These requirements include the provision of annual reports that prove that you are hiring a diverse workforce. This includes demographic data on your employees relating to race/ethnicity, gender, and job categories.

Types of headcount reports

In terms of format, headcount reporting is exactly what its name suggests: a count of the number of people working in your organization at any given time. However, there are two aspects that can sometimes complicate the process. These are the types of employee headcount reports that you might need, and how you collect your headcount data.

Let’s start with the types of headcount reports that you need to be aware of.

There are three types of reports you can use for head counting. The one that you use will depend on how you classify your employees:

• If you hire full-time employees: You should use this type of report for all your employees who work enough hours each week, on a regular basis, to be classified as full-time employees.
• If you hire full-time and part-time employees: You should use this type of report if you hire a combination of full-time and part-time employees.
• Or if you hire full-time, part-time employees, and contractors: You should use this type of report if you hire a combination of full-time and part-time employees, as well as contractors and/or temporary workers.

Unless you exclusively hire full-time employees, make sure you create separate sections in your report for each employment classification.

Contents of a headcount report

Your employee headcount report obviously needs to include the exact number of employees that are currently working for you. But there are other things aspects of your workforce that you need to include, aside from this quantitative data. That way, your report will also highlight data relating to demographic and qualitative data, too.

Headcount data usually includes information relating to:

• Job status (active or inactive)
• Job title
• Employment classification (part-time, full-time, contractor, etc.)
• Tenure and seniority
• Salary
• Exemption status (exempt or non-exempt from receiving overtime pay)
• Age
• Gender
• Ethnicity
• Education level
• Location
• Retirement age
• Veteran status

You can collect all your headcount reporting data from your Human Resources Information System (HRIS). An HRIS is a form of people management software that you use to collect, store, maintain, manage, and process data at every level of your employee journey. This ranges from recruitment and onboarding right through to an employee’s exit from your organization. It’s a highly valuable tool for helping you maintain accurate records and comply with legally established reporting guidelines.

Why is headcount reporting important?

We’ve already discussed some of the benefits, but let’s take a look at why headcount reporting is so important in a bit more detail.

For one thing, compiling a regular headcount report helps you ensure HR compliance. This is especially important in terms of meeting the requirements of the Equal Employment Opportunity Commission (EEOC). Specifically, the EEOC requires all private sector employers with 100 employees or more, and all federal contractors with 50 or more employees, to submit demographic workforce data, including data by race/ethnicity, sex, and job category.

Headcount reporting is also important for tax compliance and if you are hiring foreign workers. Plus, if you hire more than 50 full-time employees, you are also obligated to provide your employees with health care benefits and medical and family leave. A headcount report helps you ensure you are complying with these obligations. Check out this HR compliance checklist for more information on how to stay up to date with your legal obligations as an employer.

Finally, an employee headcount report is also important because it helps you build a stronger and more efficient business. For one thing, you can evaluate your retention and turnover levels over time and establish if there are any issues with your hiring processes or your employee experience. You can also keep track of how well your business is performing and how your workforce impacts your business outcomes. Plus, the more accurate your data is, the easier it will be for you to guide workforce planning decisions, plan your hiring budgets, and, ultimately, reduce labor costs and grow as a business.

Best practices

There are a number of best practices you need to keep in mind when you create your headcount reporting processes and procedures.

These include:

• Identifying the right metrics to track
• Collecting and maintaining employee data in a responsible manner
• Correctly classifying your employees (full-time or part-time employees, contractors, temporary workers, seasonal staff, etc.)
• Clarifying your business objectives
• Linking performance data with your business outcomes
• Making the right data-driven projections.

Let’s take a look at all these best practices in a bit more detail so that you know what you need to do.

Identify the right metrics

Make sure you maintain an accurate record of all your employee headcounts. This includes full-time and part-time employees, contractors, foreign workers and any temporary or seasonal staff you might hire. That way, you will have all data readily available each time you update your headcount report.

Headcount reporting obviously provides you with valuable data relating to your retention and turnover metrics. All this helps you keep track of how your workforce is developing and whether your business is growing. You can then make the necessary adjustments in order to boost productivity and performance. However, there are other HR metrics that you should consider to get the most from your reports.

For instance, your attrition rates and bench strength can also give you valuable insights into your workforce dynamics, so you should consider combining them with your headcount reports. The same goes for your performance metrics, absentee rates, and career path ratios. That way, you will get a fuller picture of how your employee base is evolving and make further adjustments where necessary. These metrics can also be particularly useful for executive board and shareholder reporting.

Collect headcount report employee data responsibly

The data you include in your headcount calculations is obviously of a sensitive nature, as it includes employee names, roles, salaries, and personal demographics, amongst other things. And you will likely share your reports internally, with senior managers and the CEO, and externally, with shareholders and other relevant stakeholders. This means that you are responsible for ensuring data confidentiality at all times.

There are a number of things you need to do here to make sure you don’t accidentally share any sensitive data with the wrong person.

For example, you should:

• Create and follow internal procedures in line with all recordkeeping regulations.
• Make sure you use encrypted HRIS software for collecting personal data.
• Implement other data security measures where necessary and update them regularly.
• Limit access to data to those who need it and keep a log of who accesses what at all times.
• Conduct regular reviews of the roles and responsibilities of all your HR staff to determine what level of access they need in terms of any digital software or platforms.
• Comply with any security measures mandated by federal or state laws, such as the Americans with Disabilities Act, the US Privacy Act of 1974, or the Fair Credit Reporting Act (FCRA).
• Make sure you don’t disclose any personal data to external third parties without express written consent.
• Investigate any reports of data breaches or unauthorized access and implement measures to prevent them from happening again.

Classify your employees

For your headcounts to be effective, you need to make sure you have clear guidelines for classifying the status of all your employees. This means establishing who you consider a full-time employee, and who is a part-time worker. You also need to understand the difference between an independent contractor vs an employee. Plus, you need to understand whether each individual member of your staff is classified as an exempt or non-exempt employee.

Essentially, the classification of each employee will come down to a number of factors:

• How many hours a week they work, and whether they work a fixed schedule
• What contract you have provided them with (for example, fixed term or seasonal)
• How often you pay them, and how much. For example, do you pay them a fixed salary or an hourly wage?
• Whether they work exclusively for you or also work for other businesses
• If you provide them with a payslip, or if they issue you invoices for their work
• Whether they are classified as exempt or non-exempt under the Fair Labor Standards Act.

This isn’t just important for your headcounts, either. Worker misclassification can result in a number of other problems for you as an employer. For example, misclassification of independent contractors can leave you open to an employee misclassification lawsuit. And this can result in hefty fines and penalties for your business.

Clarify your business objectives

Another important step you need to take when you create your headcount policy and procedures is establishing what your goals are. Aside from the obvious legal reporting requirements that we have already discussed, what else do you hope to achieve by running regular headcount reports?

Are you looking to decrease your turnover? Do you want to identify if there is an issue in one of the areas of your business, such as your hiring processes? Is your aim to improve workforce planning and create more effective succession programs? Would you like to create a more diverse organization?

By creating clear objectives, you will understand what data you need to include in your reports. You will also understand which metrics you should be comparing your results with. For example, if your objective is to reduce retention, then you could compare the results of your reports with your exit interview surveys. If your aim is to improve workforce planning, then you could compare data with projected forecasts. Or if you want to improve your hiring budgets, you could combine your reports with your salary audits to find out which roles are eating into your budget the most. Create clear goals and use all your company metrics wisely.

Link performance with business outcomes

Don’t treat your headcounts as separate entities. Instead, make sure you use your data to improve all your business processes so that you can boost the bottom line of your business. In other words, make sure you link the performance of all your employees with the revenue that your company generates.

The best way to do this is by calculating your revenue per employee. Revenue per employee (RPE) is an HR KPI used to calculate a rough estimate of how much money each employee generates for the company. You do this by measuring the total revenue that your organization generates over a given period (usually a year), then divide this figure by your current number of employees. This will help you determine the efficiency and productivity of the average employee at your company.

Once you’ve established what your average revenue per employee is, monitor your headcount reports regularly to see what impact changes in headcount have on your overall profits. Does your revenue go up accordingly when you hire more staff? If certain departments are understaffed, how much of an impact does it have on your business?

If revenue doesn’t adjust as you would expect, then it could suggest that there is an underlying issue with performance. This might be with specific employees or with entire departments. If you do identify an issue with performance that’s impacting your business outcomes, then you can implement measures to address them and boost productivity.

Make data-driven projections

Make sure you use your headcount data proactively to make data-driven forecasts and projections. And calculate how these projections might impact your revenue.

Can you identify any hiring or firing trends that might suggest you need to allocate more resources to specific departments? This might be in terms of training and development or offering courses to managers so that they can improve their leadership skills. Are there any areas with multiple employees due to retire at the same time, leaving departments considerably understaffed?

The more you use your headcount data to predict future scenarios, the faster you will be able to implement strategies to address them. And that way, you won’t experience any drops in performance and productivity when headcounts fluctuate.

Top benefits of using a headcount report

Let’s recap the top benefits of regular headcount reporting. This will help you understand why it is such a valuable tool for your business.

An employee headcount report can help you:

• Keep track of the number of employees in your business so that you can build an agile and well-functioning workforce.
• Evaluate your workforce growth and how it evolves over time.
• Stay compliant with legal obligations. For example, the Equal Employment Opportunity Commission (EEOC), and tax and healthcare obligations.
• Improve your workforce planning processes so that you avoid potential overstaffing or understaffing issues that could impact your productivity and costs.
• Better plan your budgets so that you can anticipate and address hiring needs.
• Ensure you allocate sufficient budgets to employee resources. For example, making sure that they have all the tools they need to effectively perform their duties.
• Improve your business intelligence and forecasting abilities so that you can make data-driven decisions now and in the future.
• Build and nurture a productive workforce and identify if there are any issues that you need to work on.
• Access the right headcount report data analytics so that you can build a diverse culture and environment that attracts top talent to your business.