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Requirement

Plan by position with employee names, titles, and drivers such as 401k contribution that sum up their fully-burdened cost

Functional Area

Planning

Industries
All
Tags
Budgeting
DETAILS

Description

Planning by position in Corporate Performance Management (CPM) software involves the ability to budget and plan according to individual employee's roles, titles, and cost drivers such as 401k match, medical, dental, tax locale, bonus, merit increases, and so on. This detailed analysis provides a comprehensive understanding of the fully-burdened cost per employee contributing to the overall company expenditure.

Example Use Case

Scenario: A healthcare organization uses CPM software for annual budgeting. They want visibility into the cost associated with each employee position, including salaries, benefits, and 401k match, to better understand and optimize their workforce budget.

Solution: Through the CPM software, the HR and Finance departments can plan by position. They can assign specific costs and drivers such as salary, health benefits, and 401k contribution to individual employee names and roles. The software automatically sums these up to calculate the fully-burdened cost of each position, enabling an effective workforce budgeting process.

Considerations

Some products will offer several of these pre-built drivers for the most common use cases, making implementing a named employee workforce model a breeze. These drivers automatically calculate and roll to the appropriate accounts in your overall expense model.

Some industries have their own requirements that contribute to the burden. Templated workforce planning tools may show you some helpful drivers to start, but what if you want to add more? Seem simple? It might not be. Consider the following potential contributions to a fully-burdened employee cost:

Component Definition
Base Salary The employee's gross salary before any deductions.
Employer Payroll Taxes Contributions required by law, such as Social Security, Medicare, unemployment insurance, and other payroll taxes that employers must pay on behalf of their employees.
Benefits Costs of providing benefits such as health insurance, dental and vision coverage, life insurance, disability insurance, and retirement plans (e.g., 401(k) contributions).
Paid Time Off (PTO) The cost associated with vacation days, sick leave, personal days, and public holidays that the employee is entitled to.
Training and Development Costs related to professional development, including training courses, seminars, workshops, and any other educational programs.
Bonuses and Incentives Any performance bonuses, commissions, profit-sharing plans, or other incentive-based pay.
Workplace Equipment and Supplies The cost of providing the necessary tools, equipment, software licenses, office supplies, and any other materials required for the employee to perform their job.
Workspace Costs Costs associated with physical office space, including rent, utilities, office furniture, and maintenance expenses, allocated per employee.
Technology and Communication Tools Expenses for providing laptops, mobile phones, internet access, communication software subscriptions, and other technology tools.
Retirement Contributions Pension contributions, or more commonly, 401k match contributions that vary based on what the employee withholds from their paycheck.
Recruitment and Hiring Costs Expenses related to the recruitment process, including advertising job openings, recruiter fees, background checks, and the time spent by internal staff on interviewing and selecting candidates.
Insurance and Liability Coverage Additional insurance costs that may be required based on the employee's role, such as professional liability insurance.
Employee Support Programs Costs of employee assistance programs (EAPs), wellness programs, and other support services aimed at improving employee health and well-being.
Relocation Expenses If applicable, costs associated with relocating the employee for the job, including moving expenses, travel costs, and temporary housing.
Employer Contributions to Social Funds In some countries, employers are required to contribute to social funds or severance pay funds on behalf of their employees.
Medicare Tax Also part of FICA, the Medicare tax rate for employers is 1.45% of all employee wages (as of 2023).
Federal Unemployment Tax (FUTA) This tax funds state workforce agencies and unemployment insurance. Does your planning model include this calculation?
State Unemployment Tax (SUTA) Rates vary by state and are determined by the employer's industry, the experience rate with former employees (such as claims made against the employer's account), and other factors. Employers pay SUTA taxes on behalf of their employees, with each state setting its own wage base limit.
State Disability Insurance (SDI) In certain states, employers are required to contribute to a state disability insurance program, which provides short-term benefits to eligible workers who have a partial or total loss of wages due to disabilities not related to work. The states with SDI programs and the rates can vary.
Local Taxes (cities, counties) Depending on the location, employers may also be responsible for additional local taxes, such as city or county payroll taxes, to fund local programs or initiatives.

Questions to Ask a Vendor

  • Detail Level: How detailed can expense drivers be broken down per position within your system? Can it account for benefits, taxes, medical, and other factors in fully burdened costing?
  • Integration: How does the software integrate with other HR and Finance systems to provide a holistic view of budgeting?
  • Pre-Built Options: How many pre-built drivers are included? How easy is it to modify the menus or add new drivers?
  • Scalability: How many employees can this system handle before it slows down?