Whether you’re an HR leader or business owner, you likely know what headcount is, or at least the general concept of tracking employee numbers. Essentially, it’s the number of people employed by a company, including full-time and part-time employees as well as contract and temporary workers. Accurate headcount data is a key metric for many different HR activities and decision-making processes, such as resource allocation, budget planning and more.

However, it’s important to note that there are various ways to report headcount, and the standard you choose can impact the results. Some of the common standards include defining who counts as an employee, excluding part-time and contingent workers or counting all employees, regardless of the length of their employment. It’s important to determine which definition works best for your business and follow it consistently.

The challenge in determining the right headcount metrics for your organization is that it gets complicated fast. There are a variety of factors to consider, such as total employee count, the breakdown of the workforce by department and location, job title and responsibilities, compensation structure, pay bands and more.

When you’re evaluating your current workforce, accurate data is the foundation for making sound decisions about what positions need to be added or eliminated to meet strategic goals and revenue targets. It’s also critical for facilitating effective budgeting, forecasting and more. That’s why it’s vital to encourage the participation of all management levels in the headcount process and use a platform that allows for easy reporting, document storage and unified data.