Salary is one of the largest expenses you have in an IT budget. To budget effectively, you better have a good handle on this one. If you are prepared, it takes just a few minutes, , , if not it can take several hours.
I like the “few minutes” concept, , , don’t you?
First, you need an IT Staffing Plan for your budget period. Start by creating a budget worksheet like the spreadsheet below or download the tool — CLICK HERE:
Modify the headings if you are on a fiscal year instead of a calendar year.
OK, , , to budget salaries for an IT Operating Budget, you need several pieces of information:
- Employee names
- New Hire plans
- Salary raise information
In my last post, Track your IT Staff just like any technology asset I discussed the importance of maintaining an IT Staff Roster.
Step 1 – List your employees
Grab your current IT Staff Roster and copy the employee names to the IT Staffing Plan worksheet you just created.
I like to group employees alphabetically within organization or function of what they do in my IT Staff Roster, , , Programmers, Infrastructure, Help Desk, etc. It helps when you can see people listed in groups like this.
Step 2 – Salaries
Copy the salary information from the IT Staff Roster into the first column of months, , , be sure they line up with the proper employee name. Once copied, replicate the salary column across all 12 months.
Quick note: When you budget it is probably October or November if you are on a calendar year. Be sure you update anyone’s salary who will get an increase between now and the end of the year.
WOW, , , the first two parts took all of 2 minutes even if you have 150 people in your organization.
Step 3 – New Hires
Define your New Hire plans for the coming year. If you have developed an IT strategy and gotten it approved, this should be straightforward. Think through each of your IT organizations and identify how many new resources you need to add.
Add rows in each group where you plan to add new hires. Call them “New Programmer #1, #2, , , etc.
Put each New Employee’s starting salary in the month you plan to hire them and replicate the cell to all cells through December.
Another 10-15 minutes spent and here is what you have so far:
Step 4 – Add raises
There is a fast way and a tedious way. I’ll give you both options and you can choose which you prefer.
Option 1 – Raise Pool – Your company probably wants to manage employee raises to a certain level, , , usually a percentage of salary like 2%, let’s say. There is a subtle difference in how this is interpreted but makes a huge difference in budget dollars.
Note: The company will interpret how they want to manage salary increases as either 2% of total salary or an average of 2% per employee raise.
Let me explain, , , if every employee was to receive a raise July 1st (mid-year) and you gave everyone a 2% raise, , , your total “raise pool” you include in a budget would be half of what it would be if the company interprets raises as 2% of total salary. All budget months prior to the raise would not include raise money.
For our example, we will assume the company gives us a 2% of total salary guideline.
OK, add a row to the bottom of your IT Staffing Plan below the Total row and call it “2% Raise Pool”. For each monthly cell, do a calculation of multiplying the Total Salary cell just above it by 2% to get your monthly raise dollars.
Add another row and name it “Grand Total”, , , then add the “Total Salary” and “2% Raise Pool” rows to get your final salary numbers.
Not quite 2 minutes to do this, , , done with budgeting salary in under 20 minutes and this is the biggest part of your budget.
Option 2 – By Individual – The other option to budgeting employee raises is to estimate a budget increase for each employee and update the employee’s salary in the month the raise is to go into effect.
To do this, you need to know when their raise is due or planned and how much you plan to give them, , , or you can simply use a 2% calculation.
Employee’s last raise date and raise amount is kept in the IT Staff Roster spreadsheet you pulled the employee name and salary information from. This information will help you determine effective dates for each employee’s raise.
Remember, depending upon how the company interprets the 2% raises, , , you could be short changing yourself by doing it this way.
Here is a look at an updated worksheet where each employee’s salary has been increased to reflect a raise, , , the shaded cells are the raise months.
The key to developing your salary budget in record time is to have most of the information already available by keeping asset records on employees with a tool like the IT Staff Roster and a change management process that keeps it current.