A Model to Improve Cashflow Payroll Cost Forecasting

Abstract

The salary cost forecasting model presented in this article can be of significant use to those compensation administrators who must do multiyear cashflow projections for human resources costs. By using the power of the personal computer, it is now possible to do “what if” analyses of the potential cost impacts of salary policy changes that could affect turnover and salary replacement rates. With the burden of calculation removed, it is easy to match—from the human resources cost side—all of the many potential business scenarios. This allows the human resources (HR) or compensation administrator to develop a human resources cost projection to cover the various economic assumptions used in business forecasts. The model also allows sensitivity analyses to assess the cost impact if actual changes differ from expectations on one or more of the key factors.