OUR PERSPECTIVES
Purpose
This brief highlights important insights from SHRM’s 2026 benchmarking data. These results provide key metrics that are pertinent to CHROs and others who lead their organizations’ HR functions. In this brief, we examine several trends present in the data as well as their implications for CHROs and the world of work. Covering the rebound of voluntary turnover rates to pre-pandemic levels and the evolving role of AI in HR budgets, these findings provide actionable data for CHROs and HR leaders.
KEY FINDING NO. 1
Salaries Accounted for a Larger Share of Organizations’ Operating Expenses in 2026 Compared to the Previous Year
In 2026, the median salary expense represented almost half of organizations’ operating expenditures (49%), an increase from 45% in 2025. This increase underscores the growing challenge that organizations face in balancing competitive salary offerings with overall financial management. Importantly, the median operating expenses across organizations of $10 million has remained unchanged in the past year, revealing that this trend is not a product of cost reductions. In recent SHRM studies, “employee salary and wages” was the top area that workers wanted their organization to address, and it was the third most important area identified by HR professionals and HR executives. Further, half of CHROs cited wage inflation as a macroeconomic challenge they are facing, underscoring its significant impact on workforce strategy. This is further evidenced by 92% of organizations awarding employees a salary increase based on merit or higher cost of living in the past year.
HR professionals’ salaries accounted for a median of 2% of operating costs. This varied by organization size:
- 3.9% of operating costs at extra-large organizations (at least 5,000 employees).
- 2.2% at large organizations (500-4,999 employees).
- 2.0% at midsize organizations (100-499 employees).
- 2.4% at small organizations (2-99 employees).
Extra-large organizations likely pay a premium due to higher salary demands and greater availability of resources. Second, extra-large organizations tend to be multinational, which adds a layer of complexity.
Takeaways & Implications
- Organizations are increasingly prioritizing competitive salaries amid rising wage inflation and financial pressures, with the median salary expense nearing half of operating expenditures and merit-based increases becoming a widespread strategy.
- Salaries for HR professionals contributed to a median of 2% of organizations’ operating expenses, though this varied by organization size and was notably higher for extra-large organizations (3.9%).
KEY FINDING NO. 2
Revenue and Expenses per Full-time Equivalent Have Decreased Since the Beginning of 2025
Evaluating an organization’s revenue per full-time equivalent (FTE) offers HR leaders a valuable metric to gauge productivity levels. The median revenue per FTE was $142,900 in 2026 and $172,900 in 2025. Because the median operating expenses were stagnant from 2025 to 2026, the decrease in revenue per FTE could represent an unexpected decline in sales. Coupling these results with expenses per FTE may reveal a more robust trend. Expenses per FTE have decreased since 2025, although not as drastically as revenue per FTE. The median expenses per FTE was $121,400 in 2026, compared to $129,400 in 2025. Again, because median operating expenses remained stagnant from year to year, this may indicate that the number of FTEs increased, potentially causing the shift in both revenue per FTE and expenses per FTE. Yet, productivity gains were not realized from this increase. Indeed, our data show that the median number of FTEs across organizations has increased to 204 in 2026, compared to 144 in 2025.
An alternative explanation for dips in productivity is increased stress levels among the workforce, which was identified by workers, HR professionals, and HR executives as the second most important issue for organizations to address in 2026. Alternatively, this decrease could reflect that there are pervasive skills gaps that have yet to be addressed through internal learning and development programs, resulting in a loss of productivity. In recent SHRM research, 4 in 5 organizations reported that they struggled with finding qualified talent with advanced skills to address their workforce needs. Lastly, it is possible that the implementation of artificial intelligence into workflows has decreased productivity in the short term.
Takeaways & Implications
- Employee productivity has decreased over the last year, possibly due to pervasive skills gaps that have yet to be addressed through learning and development programs, operational inefficiency, employee stress levels, productivity losses from AI implementation, or an unexpected decrease in sales.
- Organizations should assess the productivity of their employees in parallel with expenses per FTE to assess possible causes of a loss of productivity.
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KEY FINDING NO. 3
Outsourcing in HR Was Less Common in 2026 Than It Was Last Year, With Recruiting and HR Technology Still the Most Commonly Outsourced Practice Areas
Organizations reported whether they outsourced any HR practice areas to third-party administrators or contractors and, if so, which ones. The data indicate that 56% of organizations did not outsource any HR practice areas in 2026, an increase of 10 percentage points from the beginning of 2025. This suggests that organizations are now more likely to use internal resources than outsourcing third-party administrators. Recruiting (17%) and HR Technology (17%) are still the most common practice areas to be outsourced, though both noticeably lower than in 2025. Recruiting likely requires a level of specialized expertise that may not be available in-house, and HR Technology integration is highly complex and rapidly evolving, leading organizations to outsource.
The 14% of organizations outsourcing their Learning and Development practice area might be driven by the ongoing digital transformation that is changing the skills landscape and causing employers to seek outside knowledge and expertise on how to properly prepare the current workforce. Third parties who specialize in Learning and Development may also have an advantage from their bird’s eye view of what skills are highly valued in the future job market. Additionally, Leadership and Manager Development has been identified as the top priority for CHROs in 2025 and 2026, underscoring its critical role in driving organizational success — likely why it remains a commonly outsourced practice area.
Takeaways & Implications
- The 10-percentage-point decrease in outsourcing indicates that HR leaders may be re-evaluating the value proposition of external vendors versus internal team development.
- Despite the decrease, Recruiting and HR Technology remain the most commonly outsourced practice areas (17% apiece).
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KEY FINDING NO. 4
Organizations Spent Less on Their HR Functions Compared to Last Year, With HR Spend per Full-time Equivalent Inversely Correlated With Organization Size
Organizations have tightened their HR budgets in 2026, spending less per FTE on the HR function ($1,800) than in 2025 ($2,500). Notably, smaller organizations allocated the highest HR spend per FTE, with this figure decreasing as organization size grew — an indication of the cost efficiencies achieved with larger workforces.
In 2026, this relationship between organization size and HR cost efficiency was further underscored by the HR-expenses-to-operating-expenses ratio. Small organizations spent a median of 3.0% of their operating expenses on their HR department, while extra-large organizations spent 0.7% of their operating expenses on their HR department. Similarly, staffing ratios reflect this trend: Small organizations employed a median of 3.33 HR professionals per 100 non-HR employees, compared to just 0.8 HR professionals per 100 non-HR employees in extra-large organizations.
Amid financial changes, economic uncertainty looms large. Nearly half of CHROs (49%) in recent SHRM research identified it as a pressing challenge, with almost a quarter (24%) citing it as their single greatest obstacle. These findings emphasize the critical balancing act that CHROs face: managing workforce strategies and budgets while navigating a turbulent economic landscape. As a result, organizations are spending less on their HR function than would be expected, as evidenced by declining staffing ratios. The median HR-to-employee ratio declined in 2026. In 2025, there was a median ratio of 1.98 HR professionals per 100 employees, and in 2026, this ratio decreased to 1.67 HR professionals per 100 employees. Taken together, these results suggest that while organizations continue to recognize the importance of HR, they are shifting toward a more streamlined and cost-efficient approach to managing their HR functions.
Takeaways & Implications
- Organizational spending on HR per FTE decreases with size, indicating economies of scale.
- Economic uncertainty has led to organizations becoming more cost-conscious in 2026 compared to 2025, especially within their HR departments.
KEY FINDING NO. 5
Voluntary Turnover Rate Experienced a Sharp Decrease in 2026
The median voluntary turnover rate, or the rate at which employees entered and voluntarily left organizations in the previous 12 months, declined in 2026 to 10%, marking a drop from the 12% reported in both 2022 and 2025. This decrease brings voluntary turnover below the heightened levels observed during and after the Great Resignation and suggests that employees may be “job hugging” — keeping one’s job due to fears of an unstable economy and a mixed labor market. The premium for job hopping that was realized during the Great Resignation is diminishing, and employees are less likely to benefit from leaving their positions. Similar patterns were identified in the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) data using the “quit rate,” or the number of quits during the entire month as a percentage of total employment. The quit rate was 2% in December 2025, steadily decreasing from a January 2022 high of 2.9%.
As turnover has decreased, organizations are also realigning their HR budgets away from recruiting efforts, perhaps due to a decreased need for hiring. This is supported by the reduced allocation to recruiting expenses this year — 17.9% in 2026 compared to 19.5% in 2025 — as well as the drop in the “hire rate” (3.3% as of December 2025) from the JOLTS data, which is the number of hires during the entire month as a percentage of total employment. Organizations are reluctant to increase headcount, which, in part, can be attributed to economic uncertainty and a decreased demand for labor.
Takeaways & Implications
- HR professionals should proactively invest in employee engagement strategies to sustain stability and capitalize on lower voluntary turnover rates.
- Allocate additional resources toward upskilling, workforce planning, and strategic talent initiatives because reduced turnover provides an opportunity to strengthen internal capabilities and future-proof the organization.
KEY FINDING NO. 6
HR Functions Spent 5.8% of Their Budgets on Artificial Intelligence Tools for General HR Purposes
HR functions that fund their own AI tools spend a median of 5.8% of their budgets on AI tools for general HR purposes. This aligns with the growing emphasis on AI integration within HR functions, with 87% of CHROs reporting plans to integrate AI into HR processes in 2026. Similarly, recent SHRM research showed that AI and machine learning skills were mentioned in 3.1% of job postings within HR, compared to 2.3% across all job postings, demonstrating HR’s commitment to integrating AI into workflows.
The variation in AI spending across industries highlights differing priorities and operational needs. The transportation and warehousing industry spends the largest percentage of its HR budgets on AI tools (9.1%). This could reflect the industry's reliance on AI for optimizing complex workforce scheduling and recruiting to counter high employee turnover. In contrast, the health care and social assistance industry spends the lowest amount of its HR budgets on AI tools (4.4%). This reduced investment is likely due to the nature of recruiting in health care and social assistance, which is rife with complexities related to regulatory barriers, making AI integration difficult compared to other industries.
Takeaways & Implications
- Investment in AI tools for HR departments varied by industry. Organizations in transportation and warehousing invested 9.1% of their HR budgets into AI tools, while health care and social assistance organizations invested just 4.4% of theirs.
- Organizations must consider the unique needs of their workforces when making decisions about the degree of AI investment within their HR departments.
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KEY FINDING NO. 7
Small and Extra-large Organizations Dedicated More of Their HR Budgets to Inclusion and Diversity Efforts Than Midsize and Large Organizations
Organizations dedicated a median of 4.1% of their HR departments’ budgets to inclusion and diversity (I&D) initiatives this year, although this varied by organization size. Small organizations and extra-large organizations dedicated similar amounts of their HR budgets — approximately 5.3% — to I&D efforts.
It is expected that as organization size increases, organizations may spend more on I&D, given greater access to financial resources and an increased susceptibility to external pressures. However, it is surprising that small organizations allocated a comparable proportion of their HR budgets to I&D as extra-large organizations. This trend can be attributed to smaller organizations often being in the process of building foundational I&D programs, which inherently involve significant start-up costs. Alternatively, they may have an increased reliance on external vendors to assist in I&D efforts, leading to higher expenditures on I&D. These differences highlight how strategic priorities and program maturity shape I&D investment across organizations of varying sizes.
Takeaways & Implications
- Organizations invested a median of 4.1% of their HR budgets into I&D initiatives.
- Small and extra-large organizations dedicated more of their HR budgets to I&D efforts than midsize and large organizations, suggesting that I&D investment is dictated by needs that change with organizational size.
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CONCLUSION
As a result of economic instability, organizations and HR departments are reducing costs. Revenue per FTE, HR-to-employee ratio, HR-expenses-to-FTE ratio, and the prevalence of outsourcing HR practice areas are all decreasing, which is in stark contrast to HR spending in 2025. For employees, economic uncertainty might have contributed to the dip in the voluntary turnover rate, meaning that fewer employees are willing to leave their positions and navigate the unknown job market.
However, amid this focus on cost reduction and efficiency, organizations are also aligning their HR budgets to reflect shifting priorities, chiefly by including AI tools for HR professionals to keep up with large-scale digital transformations.
The insights from this data brief provide a comprehensive view of the evolving HR landscape, equipping CHROs and HR leaders with actionable metrics to navigate today’s challenges and opportunities. By leveraging these benchmarks, organizations can better align their HR strategies with broader business goals, address workforce needs proactively, and adapt to emerging trends such as AI integration, workforce productivity, and competitive salary prioritization.
How to cite this research: 2026 CHRO Benchmarking Data Brief: Belt-Tightening in HR in 2026, SHRM, 2026.
Definitions
Full-time equivalents (FTEs): The total labor hours invested by employees within an organization. For the purposes of this research, full-time employees were assigned the value of “1” and part-time employees were assigned the value of “0.5” to better estimate total labor hours invested, resulting in the FTE total. Converting the number of employees to FTEs provides a more accurate understanding of the level of effort being applied in an organization.
HR-expenses-to-operating-expenses ratio: The amount of an organization’s total expenses devoted to HR-related expenses in the year prior to data collection. This is calculated by dividing the organization’s total HR expenses by the operating expenses for the year prior to data collection. This ratio depicts the amount of HR expenses as a percentage of operating expenses, which is an indication of the amount of dollars an organization invests in its HR function.
HR-expenses-to-FTE ratio: The amount of human resource dollars spent per FTE in the organization. It is calculated by dividing the HR expenses for the year prior to data collection and by the number of FTEs in the organization.
HR-to-employee ratio: The HR-to-employee ratio provides a more manageable way to compare HR staffing levels between organizations. It represents the number of HR staff per 100 employees supported by HR in the organization. The number is calculated by dividing the number of HR FTEs by the total number of FTEs in the organization and multiplying the outcome by 100.
Revenue per FTE: The total amount of revenue received during the year prior to data collection divided by the number of FTEs. This ratio conceptually links the time and effort associated with the firm’s human capital to its revenue output. If the revenue-per-FTE ratio increases, it indicates there is greater efficiency and productivity because more output is being produced per FTE. If the ratio decreases, it indicates that there is less efficiency and productivity.
Expenses per FTE: Expenses per FTE represents an organization’s total expenses during the year prior to data collection divided by the number of FTEs. This ratio conceptually identifies how much the organization spends per FTE toward its annual expenditures on average. Higher values are indicative of greater expenditures per FTE, while lower values indicate there is greater cost efficiency per FTE.
Salaries as percentage of operating expenses: The amount of an organization’s total expenses devoted to employee salaries in the year prior to data collection. This is calculated by dividing the total amount of employee salaries by the operating expenses for the year prior to data collection.
Percentage of organizations offering a salary increase: This metric describes the number of organizations that offered employees an increase in their salary (e.g., merit-based raise or cost-of-living differential).
Annual voluntary turnover rate: The rate at which employees enter and voluntarily leave a company within the year prior to data collection. To calculate annual voluntary turnover, divide the total number of employees who voluntarily separated from the organization within the 12 months preceding data collection by the average number of total employees within that year, then multiply by 100.
Outsourced HR practice areas: The percentage of organizations that contract with external vendors or third parties to administer various HR functions.
Methods & Data
These analyses highlight key insights derived from SHRM’s 2026 benchmarking data, which builds upon and refines SHRM’s prior benchmarking research. The data was collected through an electronically fielded survey from a random sample of active SHRM Members between Nov. 24, 2025, and Jan. 23, 2026. Given the robust data collected in this research, an additional stratified sampling approach was implemented to oversample members who held a vice president or higher position within their organization. In total, 4,657 SHRM Members responded to the survey. The data is not weighted, and respondents were not required to provide data on every metric, meaning the sample size for each individual metric varies. Respondents represent a diverse range of industries, sectors, and organization sizes across the U.S.
The analyses in this brief use median values to define central tendency and identify trends in the data over time. Central tendency refers to a statistical measure that identifies the center point or typical value in a data series. The median is a commonly used measure of central tendency; it represents the middle value when the data is ordered from lowest to highest, helping to avoid the influence of extreme outliers that can have a greater impact on the average value. For example, if measuring a set of salaries, the median would be the salary that falls exactly in the middle of the range and avoids being skewed by very high or very low values. By using the median, we improve comparability across different time periods, especially when accounting for changes in methodology and metric calculations since 2016. Additionally, using the median helps mitigate the impact of shifts in SHRM Membership used for this research over time, ensuring stronger consistency and reliability in the findings.
In all graphs, the axis labels denoting years (i.e., “2025” and “2026”) refer to the year in which the benchmarking reports were published. The data within those reports reflect figures from the 12 months prior to data collection. For example, any data labeled with “2026” reflects figures from the whole year preceding Nov. 24, 2025 (i.e., the start of data collection for the 2026 report).
Decimals are reported on values involving small percentages, except where whole numbers are reported to align with historical data.