Learn How to Forecast Headcount
Learn How to Forecast Headcount
Content:
1/ Why you need to forecast your headcount spend
2/ How to Forecast your headcount spend
3/ How to Calculate Projected Spend
4/ Putting it all together
1/ Why you need to forecast your headcount spend
Your headcount spend will often account for
50-80% of your cash burn each month.
A good forecast can help determine what is the breakeven point for the company to cover the structure costs.
It helps know the volume it needs to reach to be profitable.
Your headcount spend can also be one of the most challenging costs to reduce, with a number of challenges ensuing from lay offs.
Foremost define your needs for the next 12 to 24 months depending on your backlog and sales projections.
2/ How to Forecast your headcount spend?
Start by collecting information on your existing hires from your payroll platform, and entering it into a spreadsheet.
Next, begin adding your projected hires one by one.
For a long range forecast (12 months or more into the future), add roles in bulk.
If you have department heads, check with them on their upcoming hiring plan.
Consolidate and review the consistency of all headcount with the management team.
3/ How to Calculate Projected Headcount Spend
3.1/ The Simple Method
Determine the departments with direct FTE depending on the business volume.
Apply the business growth ratio to the direct FTE to calculate the additional headcount.
Use one salary increase rate across the board to calculate the salary costs of next year.
Your salary costs of next year should be:
Number of FTE next year x Average Salary pro FTE current year x (1+Salary increase)
3.2/ The Detailed Method
Prorate the salary for any hires who joined this month, or were terminated.
Full time employees have a number of other incidental costs.
-Employer Payroll taxes
Around 8-10% of salary
-Health Benefits
Around 8-10% of salary, or a fixed $ amount per employee
-Payroll processing fees
Around 25% of salary, or a fixed $ amount per employee
Other payroll costs to consider:
-Bonuses Commissions (could be monthly, quarterly or annually)
-Recruiting fees (often times a % of first year salary)
-Training costs
-Additional structure costs (place, energy, equipment, could be marginal if the structure is already big, but for smaller team, this is an impact to consider)
4/ Putting it all together
Slice and dice your data on a departmental basis, and by each cost type.
Use Graphs to understand costs & hires by department, and across multiple periods.
Use ratio like FTE increase vs sales increase.
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