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Updated Jan 23, 2024

The Importance of Employee Data

By collecting and analyzing employee data, companies can gain insights into workforce trends and create a more employee-centric work environment.

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Nicole Fallon, Senior Analyst & Expert on Business Ownership
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Employee data might be your organization’s most underused tool — according to a recent report, 62 percent of businesses that introduced employee monitoring software saw enhanced productivity. Leaders and decision-makers can harness employee data to identify unique talents, highlight productivity trends and analyze how effective training programs are, among many other benefits. 

Here’s why employee data is important and how your business can use employee information to its advantage in workforce management, planning and development.

What is employee data?

Employee data is every detail a company collects about its employees and encompasses both basic and specific information. Basic data, such as date of birth or ethnicity, helps human resources (HR) teams run demographic reports about the workforce as a whole while specific data, such as workplace performance, informs decisions about promotions, training programs and more.

“Employee data should be a critical source of information when making organizational decisions,” said Dr. Elora Voyles, lead people scientist at Culture Amp. “Collecting and monitoring employee data requires an investment of time as well as vulnerability from organizational leadership. However, it’s well worth it when considering the risks of not surveying employees. Neglecting to survey employees can result in tone-deaf decisions from management, an increase in burnout and subsequent employee turnover.”

When businesses collect and analyze employee data, leaders and decision-makers not only improve their company culture but they also jump ahead of the competition by listening to employees at every level. 

Examples of employee data

There are many different types of employee data, including the following:

  • Employment status (full-time, part-time, contract or freelance)
  • How an employee gets to work (commuting time and method of transportation)
  • Length of employment
  • Attendance logs
  • Compensation information and records
  • Overall performance, including performance reviews
  • Personal details, such as address and date of birth
  • Recruitment or hiring details
  • Certifications and training courses

Why collect employee data?

Employee data serves two purposes, according to Voyles. First, organizations can understand employees’ perspectives and anticipate employee reactions to new policies. Second, surveying employees gives them a voice and empowers them. 

“Together, these benefits increase employee engagement and reduce potential negative reactions from employees,” Voyles added.

Here are a few specific reasons to collect and analyze employee data.

1. You’ll gain a more accurate picture of workforce trends.

From a demographic, psychographic and performance perspective, gathering employee data helps decision-makers and HR departments develop a holistic view of the workforce. Instead of focusing on one employee who may or may not be an outlier, HR teams who look at the entire workforce can identify patterns, pull out insights and present the data to higher management to make a lasting impact on the company.

For example, if a restaurant manager finds through employee data that all the female servers end their night shifts 10 to 15 minutes ahead of their scheduled clock-out time, it’s reasonable to assume that something makes each server want to leave early. Perhaps the parking lot lights shut off before their clock-out times and they don’t want to walk alone in the dark to their cars. Identifying trends in data by using reputable HR software for restaurants can uncover a problem like this one. Then, the business can find a solution instead of ignoring the issue.

2. You can identify patterns of growth and loss.

Turnover is a hurdle every company faces, regardless of size or industry. If you analyze your employee data, however, you can control your turnover percentage to an extent. When employees leave your company, you can look at factors, such as the average employment length and number of disciplinary actions received, to find patterns that help you and your HR team understand why employees quit.

In addition, employee data, such as seasonal hiring dates, can help your HR team craft messages and time job postings to maximize the number of candidates who apply.

3. You can increase productivity and reduce turnover rates.

Similar to the benefits of human capital management software, employee data can reduce turnover rates and boost productivity when used effectively. The ways to leverage data are numerous but here are some examples:

  • If managers see a dip in productivity in the middle of autumn when days get shorter, the employees could be suffering from seasonal affective disorder or have family obligations around the holidays. In either case, managers could have an honest one-on-one conversation with each employee and ask how to support them better.
  • Perhaps a well-performing salesperson’s numbers have significantly decreased over the last three months. The manager also observes that they have changed their benefits policy and started staying later at night, which could signify a personal crisis. Managers can then take steps to support that employee’s needs. 
  • An entry-level or midlevel employee who has every certification, but hasn’t been promoted, might be overlooked. Upon further investigation, the company finds they have leadership potential and can help the company thrive.

In each scenario, the company investigates and resolves the issue in a way that focuses on the employee. This way, the employee knows the company not only cares about their performance and values them as a team asset but also has regard for their personal life and wants to support a healthy work-life balance. 

Bottom LineBottom line
Employee data is important because it will inform your company about worker perspectives, which can lead to better decisions, higher staff productivity and lower turnover rates.

What types of data should be included in an employee database? 

As the adage “garbage in, garbage out” implies, the effective use of employee data begins with entering the right data.

The details that belong in an employee database depend on the way you and your organization plan to use that information. Regardless of industry or company size, every database should include certain details:

  • Identifying information: Basic identifying information includes name, age, race and/or ethnicity and contact information.
  • Workplace performance: An employee database is the ideal place to keep historical records and track employee performance through annual review documents, attendance logs, sales numbers, work projects and more.
  • Benefits information: Even if you don’t offer an extensive healthcare policy or retirement plan, it’s important to track what benefits your employees do receive or opt in to. Take a look at our top choices for employee retirement plans.
  • Recruiting data: Collecting this information can help your company recruit top talent more efficiently given enough time. You can measure the time and cost to hire employees to determine your job acceptance rate, which can help you decide whether you should work with a staffing agency or build an internal recruiting team. 
  • Educational and professional information: This includes academic qualifications, such as degrees and academic institutions, professional certifications and any previous work experience.
  • Medical records: An employee database can be used to store and access employee sickness records, accommodations and details of any injuries received during work. 
  • Attendance information: You can track an employee’s time off requests and overtime along with attendance records, history and timesheets. This data reveals an employee’s punctuality, absences and leave patterns and helps boost productivity by spotting issues like lateness or excessive absenteeism.
  • Time tracking: Time tracking documents the amount of time worked on a particular project or activity. This helps understand work allocation and project costs while ensuring employees are paid fairly for their time.
  • Employee engagement: Gathering this data will help you gauge your employees’ commitment to the job and team. It helps enhance your employees’ experience while also detecting and addressing engagement issues early on. Employee engagement data additionally reveals job satisfaction and retention. 
  • Exit records: This includes information gathered during exit interviews or termination documentation. You can also record the employee’s length of employment, as well as their final pay and list of benefits. 

How do you find and manage employee data?

By using the correct tools, you can efficiently manage employee data, which in turn can be used to propel your company forward. 

How to collect and use employee data

Before choosing the right employee database and tracking tools, ensure your chosen tool offers a two-way flow that gives employees agency over the information they choose to share. The tool or software used to collect employee data shouldn’t infringe on privacy or leave employees with questions about how their data will be used. They should know explicitly that data collection and analysis will help your business build better company processes and/or work culture.

To collect employee data via robust HR systems, managers should give employees a choice to opt into sharing specific data points. This allows employees to take an ownership role — potentially resulting in an increase in shared information or information that is more in-depth. A few methods to consider include the following.

Applicant tracking system (ATS)

An ATS is utilized before an employee is hired and collects specific information during the recruiting and hiring process. An ATS can collect applicants’ experiences, education levels, qualifications and information gathered during an interview. 

HR information system (HRIS)

An HRIS is the most basic solution for gathering employee-related data. Most include an employee self-service portal, which is an efficient way to gather basic information and update facts when necessary. For work performance data, salary and benefit information, a manager self-service portal — much like the employee one — is the most effective way to gather basic data and standardize input across an organization. 

HR management system (HRMS)

An HRMS is a more robust software solution that integrates other HR-related tasks, such as payroll and time and attendance. These solutions are generally more expensive, but also allow businesses to collect larger data sets more efficiently. 

Conducting surveys and interviews

For more open-ended feedback, there are multiple ways employees can share their insights, such as anonymous surveys, direct emails or a face-to-face conversation with their supervisor. During this collection process, communicate how responses will be used and then update employees on how the information was applied, said Voyles. 

“The ideal process for surveying employees and creating real changes involves administering an annual survey, identifying strengths and weaknesses, selecting and implementing an action plan and then administering pulse surveys to monitor progress in key areas targeted by action plans,” she said.

FYIDid you know
Involving employees in responsible data collection increases the amount of in-depth information they provide. This information allows you to discover insights that make your business better.

Using HR software for employee data

One of the biggest hurdles HR teams face is employee distrust of HR systems. The most important priorities when picking an HR software to handle employee data are maintaining confidentiality and protecting important information.

The best HR software simplifies HR responsibilities, optimizes processes and improves productivity for your organization. It opens up an opportunity for collaboration between information and HR departments to ensure the HR software protects employee data.

HR systems that can anonymize data using built-in analytics tools and still identify patterns in employee behavior are great choices, especially for larger organizations. The employees not only feel their information is safe and confidential but also know their personal details aren’t identifiable by supervisors or co-workers.

Sean Peek contributed to this article. Source interviews were conducted for a previous version of this article.

author image
Nicole Fallon, Senior Analyst & Expert on Business Ownership
Nicole Fallon brings a wealth of entrepreneurial experience to business.com with nearly a decade at the helm of her own small business. She and her co-founder successfully bootstrapped their venture and now oversee a dedicated team. Fallon's journey as a business owner enables her to provide invaluable insights into the intricacies of the startup process and beyond, along with guidance in financial management, workplace dynamics, sales and marketing, and more. Beyond her personal entrepreneurial endeavors, Fallon is skilled at offering macro-level analysis of small business trends as a contributor to the U.S. Chamber of Commerce. Her observations have also been published in Newsweek, Entrepreneur and Forbes, showing she's a trusted voice in the business world. Fallon's collaborative spirit extends to partnerships with B2B and SaaS companies, where she lends her expertise to drive innovation and sustainable growth. Her multifaceted experiences converge to offer a holistic perspective that resonates with budding entrepreneurs and industry leaders alike.
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