The people section is actually our most straightforward in the model so every relevant item for getting started and setting up your people section correctly is largely covered in this one video:
Key Takeaways from the Video:
General "Basics" for the People Section
Adding Employees and Adding Contractors is the exact same process in the model- use the big purple action button in the top-right corner.
The main difference here is that contractors usually use the Monthly Salary Option in the drop down and you leave the "Taxes & Benefits %" metric as "0." By contrast, to add a W2 Employee you usually select the "Annual Salary" option and there will be a non-zero number for the "Taxes & Benefits %".
The "Cost" Formula is taking the annual / monthly salary, adding the taxes and benefits you input as an additional cost on top of the actual salary and then dividing that sum by 12.
The "Taxes & Benefits %" metric is accounting for payroll taxes, healthcare benefits, benefits packages, and similar items that incur a cost for the company.
If a company is typically covering only payroll taxes this will be around 8%
If a company is covering a full suite of healthcare, dental, etc. in addition to payroll taxes we usually recommend anywhere from 20%-25% as a solid value to enter. We definitely understand in the startup world, uniquely, benefits packages can be used to offset salaries by quite a bit (which would result in a taxes & benefits % of higher than 25%) but these are our generally acceptable / defensible recommendations.
To assign an employee to an existing department, click the white bar beneath the word "department" and then click the department you want to place the employee in.
If you need to make a new department altogether, just click into this white bar and begin typing the name of the department, then hit "enter" to create the department.
By default, the departments will organize alphabetically A to Z. You can force the departments to be organized in whatever order you wish by putting a number in front of the department. Then it'll organize them by the numbers in front before organizing them alphabetically.
Beginning to Fill In Your Existing Hiring Plan
You'll be expected to know your hiring plan for the next 12-18 months so enter these people in individually and for the later years, use modeled hires to automate your hiring process.
If you have an employee that has already been with the company should you enter in their actual start date?
For example, "Lucy has been with the company for 3 years- what should her start date be?".
Her start date should coincide with the start date of the model, if that's the beginning of 2022 just show the start date as January 2022. Any cost that she's been responsible for to date will be captured when you load in today's cash balance and the forward looking cost will be captured by you putting in an accurate salary & taxes & benefits %.
Preparing Your Hiring Plan for Future Months (>18 Months) Using Modeled Hires
To get a step by step walkthrough of how to add automatic hires or low maintenance hires use this article: Click here to view our walkthrough on Modeled Hires.
Updating Your Salary Expense Monthly Once You Receive Historical Data
Create a historical variance line to track the difference in your historical data (from your P&L).
This is functionally just creating a new, annual salary employee and labeling the title "Payroll Variance" in a department titled the same. Pro Tip is to have this variance line saved inside it's own department also titled "Historical Payroll Variance" and to make this department appear below the rest of your true departments.
You'll also need to edit the "cost" metric within this line item and set the minimum to "no specific value". This will allow you to enter negative numbers, if necessary as a manual override to the "cost line" to ensure your P&L and forecast match.