As you gear up to begin next year’s budget planning process, a sound workforce budget can help you keep the rest of your financial budget on track. PrideStaff Financial has put together key points for an effective workforce budget for 2014.
Determine proper classification for part-time employees. Every firm has variations in employee classification. Whether part-time, full-time, or outside consultants, you need to classify them appropriate to the pay they will receive. Misclassifying an employee or the number of employees in each category can have a tremendous effect on your budget for the upcoming year. Make sure you know approximately how many people you anticipate hiring, and how many of them will be full-time or part-time employees.
Be conservative but realistic about projected revenue. Firms grow, either by expanding a service, adding a new service or opening a new office. Then there are your sales and tax revenues. These need to be accounted for in your budget. Be sure you identify whether the funds you’ve budgeted are committed, likely or possible. It’s better to tack a new service onto your budget later in the year when its funding is confirmed, than to have to cut back midyear when funds don’t come through.
Estimate a pooled fringe benefit rate for staff. Every employee has a specific mix of payroll taxes and benefits. The former includes Social Security, Medicare and unemployment insurance, and the latter includes such benefits as pensions, and medical, life and disability insurance. Rather than estimating the cost of the tax and benefit package for each employee, pool the costs for all employees. Remember that you budget only for the employer share of these costs. You can divide the total fringe cost by the total salary cost to determine a “fringe rate” which can be applied uniformly to employees. If some benefits (like health insurance) are limited to employees who work a certain number of hours, you may want to have two rates, one for full-time or benefit-eligible employees and one for part-time employees who are not eligible for the same benefits. This simplifies the process of budgeting, safeguards confidentiality of an employee’s choices, and protects your firm.
Your firm’s budget process, its creation and monitoring, is a critical component of programmatic and financial management. A common problem is that ownership of the firm’s financial health is not communicated to others involved in the process effectively. The stress of that burden is heightened when financial projections are unrealistic. If you keep PridStaff Financials tips in mind, aim to be realistic, and involve board members in the budget process, you should see benefits to your own health as well as that of your organization. PrideStaff Financial wants to help you budget for a brighter future. Contact us to learn more.