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It is a reality that employee-related costs comprise a significant percentage of an organisation’s operational costs. Typically, a Workforce planning solution caters to the traditional finance cycle of the annual budget and the year-to-go periods of the quarterly forecasting. If an organisation wanted to perform long-term planning of Workforce costs, this was done at a cost centre level with a subset of accounts. The COVID pandemic triggered an emphasis on the costs, with organisations quickly looking for ways to gain further insight into them. A critical aspect in the decision-making is truly understanding where these costs are.

One of our clients had detailed payroll costs for their employees for the first year of a forecast and used higher-level driver-based planning for the subsequent years. It was a comprehensive EPM solution covering the P&L for six countries which was collaborative, explainable, accurate and could be created quickly compared to the previous Excel-based solution. The pandemic, however, changed the approach to forecasting. There was a demand by the business to truly understand their cost base and the CFO recognised that Workforce planning was key to understanding this.

The request to inlumi

We were asked to enhance the existing Workforce solution we had originally implemented, to enable multi-year Workforce planning at the same granularity as the first year of the budget or forecast. In addition, the client moved to a three-year rolling forecast that was performed every month. The solution had to be performative, easy to maintain and scalable, covering all aspects of an individual employee such as:

  • Wages and salaries
  • Bonuses
  • Social taxes
  • Allowances
  • Pension
  • Pay adjustments

There was also existing functionality for new hires, leavers, cost centre moves and temporary labour that needs to be incorporated into the solution.

The starting point

The starting point to Workforce planning is the master data containing new employees and the initial driver information, such as annual salary. This data load is performed in minutes and automatically extrapolates to the individual periods from the first forecast period to the last period and year of a monthly forecast. The labour accounts and cost centres are populated by country and updated data appears in the P&L from day one of the forecast.

Forecast Adjustments

The business analysts are able to amend drivers and costs in any period or year of the forecast and see the changes immediately reflected in the P&L. The solution provides real-time reports by individual, cost centre, line item or a combination of data intersections. A cost centre owner can clearly see the impact of payroll changes, thus enabling a greater level of visibility that enhances the decision-making process. The costs are clearly explainable and traceable, permitting the overall result to be credible and accurate.

Flexible

Given the nature of the pandemic, a flexible and scalable EPM solution is key to adding value to an organisation. inlumi created functionality to allow additional forecasting years to be added during a forecast process. The Workforce data could be extrapolated to a further year, without the need to restart the forecast process or requiring the reloading of the payroll master data. This not only allowed a greater degree of flexibility, but also reduced the need for another forecast process to be performed as the existing one could be modified.

The outcome

The business can now accurately forecast their Workforce costs in the medium- and long term, greatly aiding the decision-making progress regarding gross margins and capital expenditure. There is confidence in the numbers. Any changes to the Workforce are reflected by the monthly forecast cycle highlighting trends, showing variances and allowing further adjustments to be made in the headcount planning. Ultimately, the organisation can better plan their financial resources to meet their business aspirations and objectives, in the knowledge and comfort that a sizeable percentage of their cost base is accurately and reliably forecast.

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