This year, CEOs are prioritizing growth, technology and the workforce, and HR leaders are focused on initiatives that will drive success in these high-priority areas.
However, HR leaders have to balance CEO growth expectations with HR budgets, which are becoming increasingly conservative. According to a Gartner December 2024 survey of more than 500 HR organizations, fewer HR leaders planned to increase budgets this year (35%), down from 40% in 2024 and 45% in 2023. Meanwhile, more HR leaders planned to cut spending this year (33%), up from 30% in 2024 and 29% in 2023.
In order to achieve success in strategic areas and balance costs, HR leaders need to understand if their function is performing efficiently. Benchmarks are necessary to validate HR’s performance, inform discussion about HR’s strategic priorities and business impact, and identify areas where the spend may need to be adjusted.
However, HR leaders often lack fundamental data about HR staffing allocation and HR spending ratios to guide both HR optimization plans and investment strategies. Gartner has outlined benchmarks for key metrics that HR leaders can use to inform and optimize function performance:
HR spend as a percentage of revenue and a percentage of operating expensesHR spend per employee and HR activity area spendHR productivity ratios
HR spend as a percentage of revenue and operating expenses
HR cost as a percentage of revenue is often the most recognized metric, as it shows the investment levels in the HR function relative to organizational performance. According to Gartner’s survey, the median HR functional spend as a percentage of revenue is 0.80%, a lower level of investment compared to other functions, such as finance (1.25%), IT (3.14%), sales (4.47%) and marketing (7.5%).
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CEOs are prioritizing growth, technology and the workforce, and HR leaders are focused on initiatives that will drive success.