Profit per Employee
Date created: Oct 6, 2019 • Last updated: Mar 15, 2021
What is Profit per Employee?
Profit per Employee is a measure of Net Income for the past twelve months (LTM) divided by the current number of Full-Time Equivalent employees. Because labour needs differ across sectors, this ratio is often used to compare companies within the same industry.
Alternate names: Net Income per Employee (NIPE)Formula
How to calculate
If a company employs 50 people and has profits of $1.0M annually, their Profit per Employee is $20,000 on an annual basis. If the company invests in employee training and more efficient processes and sees their profits grow to $1.5M annually, based on the same number of employees, their Profit per Employee will be $30,000 annually.
Profit per Employee
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More about this metric
Mostly used to compare companies within the same industry to one another, geography, labour costs, and company stage will all impact this ratio.
Unlike Revenue per Employee and Expenses per Employee, this ratio considers both income and costs. This makes it a good summary metric, but hides some details that are exposed by the other two KPIs.
As with any metric that measures employee efficiency, improvements are gained either with investments in training and culture or by investing in processes and automation (the latter can also be used to reduce the number of employees needed).