Staff costs – what you need to know

Staff costs – what is the total staff and benefits bill?

Just as any manager should be familiar with the costs that make up their product or service, HR people should understand the cost of people to the business and the area that they support.

The total cost of salary and benefits to your business is basic information that HR will know, but in addition to this, HR will really benefit if it knows the key ratios between the component parts of the salary and benefits bill. If one area of the business wants to increase its headcount, this information will help you to be in a position where you can advise on the impact to the budget in terms of the level of employee benefits and salary that would be required to implement it.

In addition to the raw numbers, it is important to know where key changes in the cost ratios happen. In Italy, for example, ‘Dirigenti’ (part of employment law) states that when an individual reaches a certain level within an organisation, they are offered extra protection in law and extra benefits. Employers find that the cost of salary and benefits dramatically increases if they choose to promote someone to a certain level.

In UK companies, while there is no requirement in law, there will often be a level of management where the benefits package increases – sometimes dramatically.Executive pension schemes, healthcare or car allowances may be made available.

Decisions to hire people at a certain level versus hiring more than one person at a different level will, therefore, be informed by these factors.

HR business partners can also benefit from understanding their competitors’ ratios in terms of employment packages cost. If you understand competitors’ staff costs and their ratio of salaries versus bonus pay, or cash pay versus benefits, you will be able to ensure your packages are competitive and appealing to the staff you’d like to attract.

All of this information will enable you to strategically engage the line managers in sensible conversations about the degree of cost that special requests might have, or the impact of their plans on their staffing budget over and above salary costs.

Comments are closed.