People Cost Forecasting

People costs are deceptively difficult to forecast accurately because they change in multiple ways simultaneously:

• Planned hires add new fixed costs at different points in the year
• Pay reviews create uplift on existing costs (usually annual)
• Employer NI thresholds and rates change each April
• Pension auto-enrolment contributions are percentage-based and scale with wages
• Attrition removes costs (often unplanned) while rehiring adds costs back

A payroll model that is only updated when something changes will be systematically out of date. Build a rolling 12-month forecast and refresh it monthly.

Start with your current payroll data and model forward:

1. Ask AskBiz: *'What is my current monthly payroll cost broken down by employee and role?'*

2. Add planned hires — enter each planned hire with start date and salary

3. Apply a pay rise assumption — e.g. 4% across all staff in April

4. Add employer NI — AskBiz can model NI at current rates against each salary

5. Add pension contributions at your current rate

6. Model planned leavers if you know of any

The result is a month-by-month payroll cost forecast for the next 12 months, which feeds into your cash flow forecast.

Build three scenarios:

Conservative (base): only confirmed hires, current pay rise assumption, no unexpected turnover.

Growth (upside): confirmed + planned hires, higher pay rise to remain competitive, normal turnover.

Constrained (downside): only backfill hires, pay freeze or below-inflation rise, higher turnover than expected.

Ask AskBiz: *'What is the difference in total payroll spend over the next 12 months between my conservative and growth hiring scenarios?'* — this quantifies what the hiring plan actually costs before you commit.

UK employer National Insurance is a variable cost that changes with government policy. From April 2025, employer NI rates increased to 15% and the secondary threshold dropped — increasing the NI cost for many small employers.

When building your payroll forecast:

• Always use the current rate from HMRC (check gov.uk annually)
• Model the impact of NI changes on your total payroll cost — for a team of 20 at average salary, a 1% NI rate change can add £5,000–15,000 to annual costs
• Factor in the Employment Allowance if you qualify (reduces employer NI by up to £10,500/year for eligible businesses)

Ask AskBiz: *'What is my estimated employer NI cost for this year based on current headcount and salaries?'*