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Expenses per Employee

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.

Alternate names: OPEX per FTE

How to calculate Expenses per Employee

ƒ Sum(Operational Expenses LTM) / Count(Full-Time Equivalents)

Example

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.

More about this metric

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.

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