Salaries and KPIs: the hidden pitfalls of staff costs
«Five people at 100k each means 500k payroll.» In simple terms, yes. But vacations, sick leave and turnover change the picture — unless you plan for them.
What's actually hard about calculating payroll? Five people at 100k each — that's 500k in staff costs. Plus a 10% bonus on a million in turnover — another 100k. Total: 600k. In simplified form, that's exactly right. But there are nuances.
People take vacations
If you don't build it into the rotation in advance, during a vacation you'll either have to pause the employee's function or find a temporary replacement — while still paying the salary. A simple fix: add an extra 1/12 of the annual salary (with 30 days of vacation) straight into the payroll budget.
People get sick
Same as vacations, except nobody agrees on it in advance. In some countries a person can officially stay on sick leave at your expense for months. The fix is the same — build in a «cushion». If you don't need it, throw a team party.
People quit
An employee has the right to leave with N days' notice (or «accidentally» fall ill the day after resigning). You'll have to find and train a replacement. Who will do it, and how long will it take? Even if it's you — you're pulled away from other tasks, and that costs money too. The fix: accept in advance that turnover exists, and keep a minimal reserve of time and money to cover it.
The takeaway: learn to plan for unforeseen (or actually foreseeable?) circumstances in advance, to avoid financial shocks and keep the team's morale up.
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