Definition

Workforce ROI is the return on investment of a workforce. It is calculated as follows: (Net profit resulting from the work of the workforce / (cost of hiring + cost of training and onboarding + payroll) ) *100.

Why Is It Important to Calculate Workforce ROI?

Workforce ROI is important to all companies as labor is often the number one cost center. As the retail industry is facing increasing pressure to keep costs low, it is all the more important that they maximize the ROI of their workforce.

How to Maintain High Workforce ROI in the Gig Economy

In the rise of the gig economy, the rules around maximizing workforce ROI is changing.

In a traditional workforce, the average value produced by each worker is pretty stable as long as the turnover is not too high. With a low turnover, the value created worker almost certainly offsets the cost of hiring and on-boarding.

In the gig economy, the net profit resulting from the workforce depends on how much work workers actually perform. Sometimes, on-demand workers will only take one gig, if any at all after being hired. In that case, the ROI will be really low or negative.

There are two ways to optimize the ROI of a workforce:

  • Increasing productivity and number of gigs/workers
  • Decreasing hiring and onboarding costs

The key to increasing workforce ROI is gaining more visibility into the health of one's workforce.

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