Some of you might not realize that most companies allocate more budget on employees. This is because they are the main assets that will make the organization run well. This means employees satisfaction matters a lot on productivity. Imagine if they already work a lot the whole month, but they are paid less. This will threaten your company progress. Many employees quit because they think they have worked hard but their effort don’t get appreciation. Therefore, we think this is crucial. However, managing a budget is not easy. As a business owner, you need something to help you manage the money and allocate it properly. With a payroll budget, you can set aside the employees budget allocation so it won’t disturb other spending and incomes.
How To Make A Payroll Budget Effectively?
How Many Payroll Should You Spend?
Talking about the percentage, this is a little bit difficult on deciding what is worth it. According to Second Wind Consultant, if you spend around 13-15 percent of your profit for payroll, then your business will likely be solid standing. However, if you are running service industries, the payroll might exceed over 50% of your gross. This is better to give the employee more money than spending on goods and merchandise.
This amount will take a significant portion of your payroll costs. This includes hourly wages as well as salaries. Of course, it depends on the company style on giving the employees salary. Besides, you have to think about other things like pay increase, gifts, awards commissions, bonuses and paid benefit days. Also, this includes vacation and also sick time. Therefore, if you cannot afford such things, never offer them.
So, as we mentioned before, the payroll is not only about the employee salary, but also the benefits. Some companies provide health insurance, cell phones, gift and so on. If you have other things to offer like seminars or uniform, consider the amount as well.
Employer Insurances and Taxes
A business will always talk about tax. This includes Social Security tax, federal unemployment tax, Medicare tax and so on. This depends on the location your business is. Sometimes, laws require you to guarantee insurance for workers and disability.
You need to figure out the real costs of the employees. Find ways to decrease your payroll once you find this exceed your budget. For example, you eliminate the bonuses or small gifts. Keep in mind that you need to priorities your employees’ salary and then bonuses. Don’t forget to consider other aspects like compensation and also the working burden your employees face. If your company is high risk, health insurance is unavoidable. This is the consequence.
A payroll affects a lot on the financial statements. This is the main thing to consider. To help you manage the payroll, our payroll budget templates are ready to help you break down your expenses whether it is for employees, compensation or insurance. All of them are free!