The definitive Headcount Planning Guide

1 - Establish the status quo

Start by understanding what you’ve got to work with. You’ll need to ascertain the following:

• Current headcount and monthly cost.
• Projected headcount and monthly cost by year end.

Top tips:

• Ensure to calculate both the base salary cost and fully loaded cost (including social security).
• Involve the CEO, CFO, CHRO, Finance, People Ops and Talent Acquisition teams.

2 - Set the frame for top down guidance

Make sure you determine the actual available budget which can be freely distributed:

• Set the total budget available for new headcount.
• Create different budget scenarios to reflect significant variables during the next year. E.g. landing a new funding round vs maintaining current funding.
• Deduct from your new total headcount budget:
  • Salary increases for the existing team.
  • Extra salary cost required to cover backfills if they are joining at higher costs than those leaving the company.
• Define the average salary for new positions. This should be done at a global average for your employee base (unless the hiring location of new headcount will be particularly skewed to particular countries).
  • Gross base salary.
  • Fully loaded cost. E.g. for France add at least +45% whereas for Germany add +22% on top of gross base salaries. Your payroll team can provide you the right percentages or use an online calculator.
• Estimate the new headcount that can be hired with the available budget
  • New headcount = Total budget / Fully loaded cost.

Top tips:

• Don’t underestimate the fully loaded cost - depending how your company plans costs, you might want to consider including other variable benefit costs that increase with new hires on top of social security costs.
• Involve the CEO, CFO, CHRO, Finance and People Ops teams.

3 - Allocate headcount and budget

Setting the budget and headcount top down avoids a messy free for all: 

• Determine with the Executive / Senior team, the prioritised projects, topics or areas in the company that need investment / headcount.
• Based on these priorities, divide and allocate the budget per Executive (or budget owner) - ensure you have full Executive team buy-in to the budgets so they can manage into their teams should more headcount be requested during the input stage than budget is available for.
• Three boundaries should be provided to each Executive / Budget Owner. The budget is said to be reached if any one of these boundaries is reached.
  • Total annual budget (base salaries).
  • Total monthly run rate budget (base salaries).
  • Total number of new headcount.
• It’s important the budget owners understand why they have received the amount of funding they ended up with (that it is based on the Executive team decisions about company priorities).

Top tips:

• Make sure you only distribute the total available base salary cost, not the fully loaded cost.
• It can be tempting to save a contingency for extra headcount. In reality, this might work for adding a couple of last minute requests. However, once word gets around, the exception requests will come rolling in and you will find yourself going round in circles trying to keep within the original budget.
• Involve all Executives, inform all Budget Owners.

4 - Plan the positions

Now it comes to actually getting the inputs from the company.

• Send out the planning sheets or access to the planning tool, include a deadline for the first iteration.
• Include a guidance note. This might contain requirements such as:
  • The ratio of managers to individual contributors they should end up with in their org unit.
  • Expected phasing of roles - not all new headcount will start on 1 Jan but everyone will want their planned roles to.
• In the respective planning sheets or tool, Budget Owners now provide the following for new headcount:
  • Job title
  • Base salary
  • Line Manager
  • Target start date
  • The applicable business scenario it is for
  • Nice to haves (can be determined later with the Talent Acquisition Team):
    • Job levels
    • Expected hiring location
    • Expected time to hire (if they know its a niche role)

Top tips:

• Having a dedicated headcount planning tool will make life for your and all headcount planners and budget owners 10x easier (see what we have in Stakkd). In particular when:
  • There is a master plan overview for Finance and HR to work with.
  • Budget Owners can visually see how their orgs will be structured.
  • No need to manage loads of separate excel sheets all with different versions and updates.

5 - Review the inputs and iterate

Now comes the big moment, how closely does the top down and bottom up match?

• Ensure continuous conversations with Budget Owners during the process to ensure they are clear on their inputs.
• Match up the top down plan with the bottom up inputs, start the iteration process.
  • Balance any over vs underspend.
  • Agree with the CEO / CFO / CHRO what will be done with unspent budget, such as:
    • Bank the saving.
    • Invest as extra salary increases for the existing team.
    • Redistribute to budget owners for further additional roles.
• Review the new positions and sense check it looks appropriate. E.g. What do the new team structures look like? Has anyone over or under requested by a significant margin?
• Adjust the phasing of the new hires based on the pre-agreed business priorities.
• Stack rank all the positions, this will be the order they will end up being hired in, again linked to the business priorities.

6 - Sign off the plan

Now it all comes together:

• Get CEO / CFO approval of the headcount plan and each scenario.
• Add it to the overall Business Plan.

7 - Get ready to start hiring

See the plan become reality:

• Create the full hiring plan including salary bands, job levels etc. per role.
• Work on writing the job specs with hiring managers for each position.
• Agree how backfill roles are prioritised against new headcount.