Metric loss

Profits per Employee: A Useful Business Metric?

Wall Street stocks have been battered amid moves to raise interest rates to tackle runaway inflation – Copyright POOL/AFP/File Patrick Pleul

Every business needs to make money, even non-profit organizations need to cover their costs and have funds to invest and improve. However, when are profits excessive? There will be different perspectives on this and these questions and answers need to be placed in a political value stream.

One measure that can be applied – and then discussed – is the ratio of a company’s profits to its employees. Profit per employee is a measure used to calculate a company’s net income divided by the total number of employees to determine the amount of profit that employees bring in over a given period.

A study conducted by Tipalti looked at Fortune 500 companies (i.e. successful companies operating in the United States) and their earnings in order to calculate how much profit is made per employee in these companies and sectors.

The result of this assessment reveals the top ten companies with the most profit per employee:

Rank Company Sector Profit Number of employees Profit per employee
1 Air rental Business services $516.3 million 120 $4,302,500
2 Fannie Mae Finance $11.8 billion 7,700 $1,533,117
3 KKR Finance $2.0 billion 1,583 $1,265,003
4 NortonLifeLock Technology $3.9 billion 3,600 $1,079,722
5 Freddie Mac Finance $7.3 billion 6,922 $1,058,365
6 Vertex Pharmaceuticals Health care $2.7 billion 3,400 $797,529
seven Altria Group Food, beverages and tobacco $4.5 billion 7,100 $629,155
8 Visa Business services $10.9 billion 20,500 $530,049
9 Enterprise Product Partners Energy $3.8 billion 7,130 $529,537
ten Western channel partners Energy $527 million 1,045 $504,306

Looking at the top three companies in the table, despite an $802.4 million writedown in April of 27 remaining planes in Russia, Air Lease Corp. is the company that makes the most profit per employee.

In second place is US government-sponsored entity Fannie Mae, which saw its share trade nearly 26% on July 14 for no apparent reason, is also crowned second for making the most profit per employee.

In third place is KKR, which has just struck a deal to invest $1 billion in a minority stake in Northumbrian Water Group.

Overall, the financial industry is the sector with the highest average profit per employee. In fact, it tops the list for the highest profit per employee, averaging $78,073. It is perhaps not surprising that technology also follows closely and ranks very high, with an average profit per employee of $77,961.

In contrast, energy companies suffered a huge loss of $78,123 per employee. They were one of only three sectors to have recorded a negative profit-loss ratio per employee in the past year, the others being the transportation and hospitality sectors.

For many companies, profit per employee is not a particularly useful metric. It does not provide an indicator of efficiency or contribution per employee. For workers, this can be a source of discontent.

These kinds of numbers inevitably lead to discussions about pay equity and how a company’s profits are passed on to those who actually generate the profits in the first place – the workers.