Personnel cost planning combines individual assumptions about employees and positions as well as general assumptions for employee groups, tariffs or company divisions. Besides, right after the monthly payroll run, employee data has the highest degree of accuracy. Data accuracy decreases more and more as the analysis moves further into the future. Vice versa the strategic relevance of the planning figures increase when companies look ahead and plan over a period of three, four, five or more years into the future.
Personnel cost planning with SAP enables companies to manage their personnel costs and based on actual data to forecast and simulate this data into the future. Modern planning solutions such as SAP Analytics Cloud (SAC) offer a wide range of features and enable individual requirements of companies with regard to personnel cost planning. While setting up the functional application there are certain challenges that companies should consider in order to ensure the best possible personnel cost planning for their company.
Companies must make a decision whether they want to carry out personnel cost planning centrally or decentrally within their organization. There are convincing arguments for both scenarios. Within a decentralized planning approach team leaders carry out personnel planning on the basis of an organizational structure or cost center hierarchy. Organizationally, decentralized planning is considerably more complex as significantly more people are involved into the process operationally. The greatest strength of decentralized planning is that the team leaders are much closer to their assigned employees than central functions within the HR department. The approach makes it possible to apply the knowledge of managers which is at this point in time not available within the transactional HR systems. Besides decentralized planning supports a culture of delegation and responsibility and increases the transparency and acceptance of the overall HR planning.
Conversely, centralized planning impresses with a lean process and avoids organizational hurdles. Significantly less coordination is required, which reduces the use of resources. Central planning also helps to reduce the complexity of the overall planning process because employee shifts are not individually considered. The disadvantage is the lack of detailed knowledge according to employees within the central functions.
Quantity planning is based on the results of production planning as the main cost and capacity driver. Cost rates are determined on the basis of personnel costs incurred and production hours worked. Planning costs and required Full Time Equivalents (FTEs) for the planning periods are calculated using adjusted cost rates and requested planned hours from production planning. In production-intensive companies quantity planning helps to provide a quick overview of the required capacities and planned costs. The focus of quantity planning remains on the significant cost and capacity drivers. This results in a lower use of resources in operational planning and less effort for coordination. However, a significant disadvantage is the lower accuracy of the quantity planning.
Within position-specific planning, on the other hand, employee costs and capacities are planned on the basis of individual position and employees. The functional difference to quantity planning is that planning is carried out individually for an employee or a position. The granularity of the data is much higher. Costs and FTEs can be projected in detail based on individual groupings, tariffs or time events. Caused by planning on position or employee level, position-related planning increases the accuracy and transparency of the planning scenario. In addition, the focus shifts to dedicated employees along with an employee-related development philosophy.
In principle, both planning approaches quantity and position-specific planning are justified. Modern planning applications should be able to support both approaches equally.
Employee data is particularly sensitive and therefore requires a clear authorization concept that steers the dedicated access on employee data for line managers or central functions. Linked to this is the question which employee information is required to carry out personnel cost planning by planners. For example, on the one hand accounting assignments like organizational unit, cost centers, employee groups etc. and on the other hand information according to payment entitlements like fixed salary, variable components, special payments or social insurance contributions.
Date of birth is also relevant for strategic personnel planning in order to determine retirement dates or age structure reports in the company. Diversity analyses also requires knowledge of gender. However, employee access must be clarified in terms of processes and content. This applies in particular to planning views as well as access to employee master data (context menus).
It is advisable to take shift scenarios into consideration when designing the planning application. If an employee changes the cost center or organizational unit, the target unit must be able to see which employee is affected and requires information on this employee like current job or payment group, etc. The planning application must therefore provide an individual view according to this employee.
Furthermore, the shift must be approved or rejected. Accordingly, such a scenario must support dedicated authorizations. Should the request and approval take place via workflow or organizationally, i.e., through direct communication in-between the related colleagues? Including and designing shift scenarios in the planning solution from the start makes it much easier to configure the application and ensure a stable planning process in the future.
There are also other aspects that need to be considered when designing a planning solution tailored to the needs of the company. These include also the question which planning scenarios are required. Budget planning for the next financial year, a forecast to complete the current financial year or a rolling forecast for the permanent monitoring of organizational development require different functionalities. For a rolling forecast scenario, it is also necessary to determine what happens if planning data mismatches with data coming from transactional HR system in terms of content or timewise deviation in-between planning and transactional world.
Does the company want to use best-case and worst-case scenarios? This allows different forecasts for future business development to be outlined. In this case, planning has the task of anticipating future events.
Modern personnel cost planning with SAP offer companies an essential tool for planning personnel costs efficiently, making strategic decisions and ensuring their competitiveness. The right functionalities, appropriate authorizations and uniform data enable systematic, precise planning and control of personnel costs. If you know the typical pitfalls in personnel cost planning, you will be able to take them into account when designing your appropriate SAP solution and define the application in a way that it fulfills all of your company’s requirements.