I use a Headcount Sheet to plan salaries. We work with our recruiting department to plan for headcount based on the combination of existing headcount and open job requisitions. What I don’t plan for on the Headcount Sheet is attrition, since I don’t know who may be leaving the company in future planning periods. Are there any best practices for planning for attrition within the Headcount sheet?
There are generally two options that we recommend our clients try when planning for attrition.
Account for an overall percentage deduction in Personnel. This method gives you an overall picture of what would happen to the Personnel if a percentage of employees are terminated.
Example: 10% Layoff
- Create a Global Assumption of 90% and multiply the Personnel calculations by this amount. Thus, reducing the overall Personnel costs to the company by 10%.
- You could also create an Assumption of 10% and multiply the formulas by (1 – 10%), whichever is more intuitive to you. In both scenarios, 90% of the Personnel Expenses will remain. This will allow you get a clear picture of what will happen if 10% of the Personnel is terminated.
Add additional rows to the Personnel Sheet with negative salary and headcount amounts. Using additional rows with negative amounts will offset the expenses without requiring the current row to have an End Date for specific employees. This provides a clear picture of the change in expenses if a specific employee, or multiple employees, are terminated.
Example: Employee 1 has a pay rate of $100,000/year.
- To eliminate the expense associated with this employee, copy the employees row and insert a -$100,000 into the pay rate column. The Headcount formula will also need to be reversed, which will in turn reverse the sign on the various personnel formulas that are multiplied by Headcount which will eliminate those expenses to the company as well. For example, Medical Benefits are generally multiplied by Headcount, reversing the sign on headcount will eliminate the employees Medical Benefits expense to the company.
Because option 2 requires adding rows as well as modifying formulas, we recommend Option 1. With option 1 you would you multiply the current personnel formulas by the same Assumption that only needs to be populated once.