Budget by groups of staff positions

Budgets tend to be overly complex in the calculation of compensation for every employee on the payroll. If your company has a large number of employees, this can result in a massive amount of data entry to ensure that the correct pay rates and annual pay review dates are included in the budget, as well as considerable updating whenever pay levels are changed in the midst of the budgeting process.

In such cases, consider aggregating compensation by title, job function, work group, or department. By doing so, you can reduce the amount of information in the budget by several orders of magnitude. However, this requires the use of averages for the amount of budgeted compensation, as well as estimates for the timing of changes in compensation (though you can institute a policy for altering pay levels so that it always occurs on the same date of every year for all employees). The use of averages can be especially difficult to calculate for hourly staff, since the number of hours worked and any related overtime must be estimated for the budget period.

The use of estimates always results in less accuracy, but this may be a worthwhile tradeoff if you can eliminate a large part of the budget model.