Revenue per employee is total revenue divided by the number of employees. It is a quick productivity signal, and the number you divide by changes the answer more than most people expect.
For a business where everyone works full time all year, the choice hardly matters. For shift-based businesses, it is the whole story. A garden center that hires 30 seasonal workers in spring will look half as productive in May as in January if you divide by headcount on the day. Dividing by average FTE for the period, based on hours actually worked, gives a figure you can compare month to month.
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Whatever you choose, write it next to the result and keep using it. A revenue per employee figure without its denominator is not comparable to anything.
| Denominator | Count | Revenue per employee |
|---|---|---|
| Headcount on December 31 | 28 people | $45,000 |
| Average headcount for the year | 24 people | $52,500 |
| FTE from hours worked (41,600 hours / 2,080) | 20 FTE | $63,000 |
Same café, same year. The FTE figure is the one to compare with last year, because it reflects the hours the business actually bought. Hours from your time records are the input, which is why clean timesheets matter for this metric as much as for payroll.
Revenue per FTE becomes a planning tool when you turn it around. If last year a business produced $63,000 of revenue for each FTE and expects $1,400,000 next year, it will need about 22.2 FTE at the same productivity, roughly 46,200 hours (22.2 times 2,080). Comparing that with current scheduled hours shows whether to hire, add hours or expect overtime.
Seasonality changes the picture. Calculate it monthly using FTE for that month (hours worked divided by the full-time hours in the month) so a busy season does not hide in an annual average. A month with high revenue per FTE and high overtime is a stretched month, not a productive one.
A landscaping company earns $180,000 in May with 4,160 hours worked, which is 24 FTE at 173.3 hours a month. Revenue per FTE is $7,500 for the month. In August it earns $150,000 with 3,120 hours, 18 FTE, and $8,333 per FTE.
August looks more productive, but its time records show 520 overtime hours against 120 in May. The crews worked longer to cover two open positions. The owner hires early the next spring instead of reading August as a success.
There is no universal number. It depends heavily on industry and on how labor-intensive the work is. The useful comparison is your own trend over time, using the same method each period.
If you divide by headcount, yes, which can make businesses with many part-timers look less productive. Dividing by FTE avoids that distortion.
No. Revenue per employee ignores costs. Profit per employee uses profit instead, which tells you more about efficiency but swings more with one-off costs.
Divide revenue for a period by the number of employees for the same period. For shift businesses, use average FTE based on hours worked.
It does not by default. If contractors do core work, show a second figure that includes their hours so the comparison stays fair.
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