Expenses per Employee
Last updated: Apr 28, 2025
What is Expenses per Employee?
Expenses per Employee is a measure of the Operating Expenses for the last twelve months (LTM) divided by the current number of Full-Time Equivalent employees. Just like Revenue per Employee, this ratio is often used to compare companies within the same industry.
Expenses per Employee Formula
How to calculate Expenses per Employee
If a company employs 50 people and has operating expenses of $5M annually, their Expense per Employee ratio is $100,000 on an annual basis. If the company, in an effort to lower this value, moves their offices from downtown to the suburbs and saves $500,000 annually, their Expense per Employee ratio will be $90,000 annually.
Start tracking your Expenses per Employee data
Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data. Choose one of the following available services to start tracking your Expenses per Employee instantly.
How to visualize Expenses per Employee?
Compare your Expenses per Employee year-over-year to refine your hiring and staffing plan to reach the optimal ratio. Take a look at the chart for an idea of what tracking your data could look like:
Expenses per Employee visualization example
Expenses per Employee
Bar Chart
Expenses per Employee
Chart
Measuring Expenses per EmployeeMore about Expenses per Employee
Given the nature of ratios, you can improve your Expenses per Employee by either lowering operational expenses (for example, facilities, salaries, marketing, and travel costs) or you can increase the number of employees (at a rate that’s less than the current Expense per Employee).
Long term, and generally in line with inflation and labour availability, the natural movement of this ratio will be up.
As much as Expenses per Employee is an efficiency metric, it is also a valuable planning tool, and should be tracked over time and alongside Revenue per Employee and Profit per Employee.
Expenses per Employee Frequently Asked Questions
How can we meaningfully compare Expenses per Employee across our different office locations?
Regional cost variations can significantly skew this metric. For instance, your San Francisco office might show $180,000 per employee while your Atlanta location shows $120,000, simply due to market-driven salary differences and real estate costs. Consider creating location-adjusted benchmarks or normalizing for local cost factors when making comparisons across regions.
Is a lower Expenses per Employee always better?
Not necessarily. Excessively low expenses might indicate underinvestment in employee development, inadequate tools, or compensation below market rates—all of which can harm productivity and increase turnover costs long-term. A technology startup that increases per-employee spending from $110,000 to $130,000 by investing in better equipment and training might see productivity gains that more than offset the additional expense.
How does remote work affect this metric?
The shift to remote or hybrid work models often changes expense patterns rather than simply reducing them. Real estate costs might decrease, but technology expenses, home office stipends, and collaboration tools typically increase. Organizations should reassess their benchmarks for this metric when making significant workplace model changes rather than expecting proportional savings.