Salaries: How do you analyse, forecast, and report wages?

In every company, people are the most important asset. Without employees, there are no products, services, or customers. Employees are paid wages for their work, and these wages can represent the largest investment for many entrepreneurs. That's why it's crucial to monitor wages and forecast salary costs efficiently for each business owner.

What is included in salaries

When reporting salaries, it’s essential to track not just the gross or net salary but also the total salary costs, which include additional expenses like pension contributions, social security payments, accident insurance, unemployment benefits, and vacation liabilities. If your business uses external services like temporary labor or subcontracting, these should also be included to get an accurate picture of the total wage costs. Practical tip: Analyse wages, additional costs, and external services in accounting, and compare these figures to revenue. Alternatively, use Riskrate automated reporting, which provides analysis and pre-built metrics to you with a click.

How salaries affect productivity

Salaries impact productivity with a delay. If wages increase faster than revenue, company productivity will decline. However, with effective recruitment and work organization, a wage investment can significantly increase revenue.

A great way to monitor productivity is to track the ratio of wages to revenue. When revenue grows and the relative share of wages decreases, productivity increases. On the other hand, if the proportion of wages increases, it’s time to analyze operational efficiency.

Practical tip: Calculate wages and external services and divide by revenue to see your wage percentage on a monthly basis. Alternatively, use Riskrate, which provides real-time analysis, metrics, forecasts, and visual reports about wages to share with your customer with a click.

External services and their impact on salaries

Many companies rely on external services like temporary labor or subcontractors, especially during busy seasons or for specialized tasks. Including these variable costs with fixed wages gives you a more accurate picture of your overall salary expenses.

By factoring in external services, it becomes easier to determine whether hiring a permanent employee is a more cost-effective option in the long term compared to continuing to use outsourced services.

Practical tip: Add external services to your salary cost calculations and track them to revenue. You can also use Riskrate’s automated reports, which integrate external service costs into your salary reports and provide real-time metrics, forecasts, and visual comparisons with a click.

How to measure an employee's productivity

There are several ways to measure employee productivity, and the metrics should be tailored to your industry. A simple method is to calculate revenue per wage cost for each business unit or cost center, then compare the productivity across different teams or departments. Other metrics, such as hours worked, customer feedback, or project-specific outcomes, can also be valuable indicators.

The key is ensuring that productivity measurements are clear and comparable monthly so you can detect changes early and take action, whether it’s through training, task redistribution, or new hires.

Practical tip: Track the productivity of each business unit or cost center at least quarterly, and set realistic goals for improvement. Alternatively, use Riskrate’s report automation, which provides pre-built metrics, forecasts, and visual graphs for easier analysis and decision-making.

Why is salary forecasting crucial to a business?

Forecasting salary costs is vital for business planning. You need to be able to manage these costs on time, regardless of how the business is performing in the short term. By forecasting salaries, your company can prepare for economic fluctuations and make recruitment decisions responsibly.

A salary budget for 6-12 months helps you visualize the bigger picture. For permanent staff, salary costs are relatively predictable, and changes typically involve new hires or staff turnover.

Practical tip: Create a salary budget or forecast annually and update it whenever staffing levels change. Alternatively, use Riskrate’s AI-based forecast to predict salary costs and additional expenses for the entire fiscal year. You can also track actual salary costs in real-time against the forecast with Riskrate’s automation tools.

Conclusion

Salaries are a crucial investment in your company’s future. A well-managed workforce leads to growth, efficiency, and stability. By systematically tracking salaries, measuring productivity, and forecasting salary costs, you create a strong foundation for success in any economic environment.

1. Automatically connect salary data and revenue Use financial management tools that import gross salaries, additional costs, and external services directly into a report without manual input.

2. Track salary costs to revenue Utilize a reporting tool that automatically calculates the ratio of salaries to revenue, forecasts, and shows trends in a graph.

3. Forecast and plan future salary costs Leverage salary budgeting software, like riskrate, that automatically predicts personnel costs based on your current workforce structure and updates immediately when changes occur.

4. Automatically calculate revenue per employee, cost-center, or business unit Regularly follow revenue per employee, cost-center, or business unit without extra manual calculations.

5. Include external services in salary reports Use software that captures external services and automatically integrates them into your salary reports for seamless comparisons.

   
   

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