The bottom line: How to calculate ROI in Human Resources

‍Every manager hears the same question over and over — what’s the bottom line? The pressure intensifies when your work becomes harder to measure. HR is often at the forefront of this challenge.

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We all know how important people are to business success. They create momentum, spark new ideas, and drive everything forward. Supporting employees should always be a priority. However, it can be tricky to justify spending when results don’t show up as directly as revenue.

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That’s where ROI makes a difference. Calculating ROI in human resources helps translate people-centred efforts into numbers that speak to decision-makers. Nevertheless, what is ROI exactly? How do we apply it to HR?

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Why you should calculate ROI in Human Resources

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Return on investment (ROI) is a simple way to compare what a project costs with what it brings back. It shows if something’s worth doing from a financial point of view.

The formula for calculating ROI is pretty simple: ‍

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ROI = [(Payback - Investment)/Investment]*100‍

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You take the return you gained from the project and subtract the investment cost. After that, divide the result by that cost and multiply it by 100. You will get a percentage that shows how profitable the project was.

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What is ROI in Human Resources?‍

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As you can see, ROI is a handy tool for representing a particular investment's benefit. However, when it comes to HR, the outcome of projects is rarely portrayed in numbers. It usually stays within the qualitative, amorphous region of ‘improved morale’, ‘better engagement’, or ‘employee happiness’.

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In many ways, this is why ROI is so important for Human Resources. It’s one of a few metrics that can give more weight to HR decisions, alongside ELV and other HR indicators (we also recommend following rates of turnover and absenteeism, for example).‍

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The fact that HR elements tend to be less numerical doesn’t mean there’s no way to quantify them. Furthermore, it’s not even complicated, but pretty straightforward. Imagine you are running a campaign to reduce work-related stress. This may involve inspirational posters, in-house therapists, and flexible working.

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With surveys, you can calculate the stress level in your organisation (converting it to the financial cost) and the cost of the programmes you’re offering to combat it. The value of the programme lies in reducing the costs associated with work-related stress, and that’s what the ROI will reflect.

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Why is it important to calculate ROI in Human Resources?‍

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As previously mentioned, there aren’t many quantifiable metrics that can be used in HR, given how people-based the profession is. For this reason, many HR managers struggle to support their initiatives with stakeholders or even simply to show their successes tangibly.‍

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Using measures like ROI boosts the credibility of projects—but it doesn’t end there. It boosts the credibility of HR as a whole. The HR department’s services will be highlighted. Their benefits will be assessed more accurately to show the department’s central role in the company.

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This becomes even more important in times like today. With a financial crisis, more and more businesses are trying to cut costs, and the first initiatives to go are those that can’t prove value. With ROI, HR professionals can provide tangible data on the fiscal benefits each campaign incurs.‍

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How can I calculate ROI in Human Resources?‍

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The main question remains: How can you calculate ROI in Human Resources?‍

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The answer is that it’s generally not that different from ROI. The formula is still ROI = [(Payback - Investment)/Investment]*100.

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However, the main difference is the need to represent the return numerically, when most of the goals of an HR project are not quantitative.

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‍There are a number of ways to do this, but they all revolve around understanding the value of your project. Take a training programme, for example. It’s designed to improve productivity. If you can show that your team now produces more, faster, or at higher quality — and translate that into financial value — you’ve got your return. Then you simply compare it to the cost of running the training.

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When results feel less direct, follow a clear plan to gather the right data:

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• Set specific outcomes before launching your project
• Use surveys and engagement tools to measure current performance
• Track relevant changes (e.g., time saved, productivity gains, retention)
• Attach a financial value to those changes using benchmarks or previous data

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You can also pull data from trusted sources like CIPD or HRZone to help frame your estimates and add weight to your case.

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Follow this plan to help you collect the data you need:‍

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How do you calculate Human Capital ROI (HCROI)?‍

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‍If you want to see the bigger picture, Human Capital ROI (HCROI) helps you understand the value of all people-related investments across the business.

The formula is:

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HCROI = Net Revenue / (Salaries + Benefits)

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This gives you a high-level percentage that shows the return generated by your people. A positive HCROI means your team’s output delivers more than it costs.

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While things like culture and engagement might be harder to pin down, they still belong in the conversation. You don’t have to assign them a hard value to recognise their role in business success. But if you can link them to lower turnover or faster time-to-productivity, all the better.

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Calculating Human Capital ROI involves estimating and measuring tangible and intangible factors. Some benefits, like higher engagement or better culture, can be hard to measure but still matter when evaluating your human capital investment.

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Book a demo today if you want to learn about Thrive’s stellar ROI and how we can help you with your HR, people development, culture analysis, and recruitment.

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