A Guide to Better Workforce Budget Planning

Successful companies know their employees are their most valuable asset but are also often the most significant expense. Workforce budget planning is a critical process that helps organisations balance their talent needs with financial realities.

Effective workforce budget planning ensures companies have the right people with the right skills at the right time while staying within their budget. This article provides a practical guide for operational leaders to develop a robust workforce budget plan.

Key Takeaways

• Workforce budget planning begins with strategic alignment and analyses and results in a bottom-up budget that meets the nuanced needs of retail locations.
• With Legion Workforce Management (WFM), you can create accurate labour budgets 12 to 18 months in advance.
• Machine learning (ML) also increases operational efficiencies by crafting the perfect budget plans based on accurate, granular demand forecasts.
• Each of these strategies brings finance and operations together by providing an end-to-end process within a single platform that continuously monitors your entire budget process.

Understanding Workforce Budget Planning

Accurately forecasting business demand and supporting labour needs 12-18 months out can be challenging, especially when the top-down budget is created independently from the operating labour model. Businesses often cannot develop long-range, accurate demand forecasts, project labour hours based on their actual labour model scenarios, or enforce and track labour budgets in weekly schedules.

Imagine if you could marry your staffing model with the labour models used in stores to create an accurate labour budget that can be enforced in schedules every week – 12 to 18 months in advance. Legion Labour Budgeting does precisely that. It enables finance and planning teams to develop accurate long-range plans quickly.

Key Components of Workforce Budget Planning

Several factors should be taken into consideration when you think about long-term workforce budget planning.

Strategic Alignment

Start by identifying your organisation's short-term and long-term goals. This step involves assessing growth projections, potential market shifts, and planned expansions or product launches.

Understanding the bigger picture can help you anticipate staffing needs and avoid reactive hiring. Every planning process needs to start with a strategy.

Workforce Analysis

The next step is analysing your existing workforce by evaluating employees’ skills, experience, and performance. You need to also determine what roles are critical for current operations and which roles might become more important as the business evolves.

These insights provide the baseline for understanding whether you have the labour needed to support your objectives. It will also highlight if you need to develop or acquire new skills.

Cost Analysis

Determining the total workforce budget is multifaceted. Beyond wages and salaries, it also encompasses:

• Benefits (health insurance, retirement contributions)
• Payroll taxes
• Recruitment costs (advertising, agency fees)
• Training and development programs

Tracking these costs in a centralized system provides financial transparency. It also supports more accurate budget forecasting.

analysing historical data and projected changes in labour rates or benefits costs can help you create a budget that aligns with your company's financial capabilities.

Supply and Demand Forecasting

Once you have a firm grasp on the lay of the land, it’s time to start getting granular. With Legion Demand Forecasting, you can create sophisticated labour models to enhance strategic planning and create long-range plans that align with your business goals.

Legion’s labour model leverages data-driven insights to help you anticipate future labour needs, manage costs, and enhance operational performance.

Budget planners can create and view labour budgets centrally at HQ or allow the creation of those budgets at your region or district level. For example, you can enable districts to enter their operating hours and generate and submit their budget scenarios.

Budget plan durations can be set for a maximum 12 months, with the planning period extending up to 18 months into the future. When each region or district submits its budget for review, you can easily update inputs to create a top-down budget for all locations or combine it with the bottom-up labour-based budget numbers. Additionally, you can create long-range labour budgets and track execution for both annual labour budgeting and ongoing monthly and quarterly reforecasting.

Cross-Departmental Collaboration

In retail settings, it’s crucial to marry staffing models with labour models used in stores for long-term forecasting. This streamlines communication between the finance, human resources, planning, and on-site teams. The result is a more efficient budget more closely aligned with store needs.

Finance plays a critical role in providing budget parameters and forecasting costs. Meanwhile, HR demonstrates its expertise in talent management. They uniquely understand the skills and experience required for different roles. The models are often unbalanced without involving both parties in creating staffing models.

This collaborative effort creates a holistic approach to workforce budget planning that is financially sound and responsive to talent requirements.

Increase Business Agility

With Legion Labour Budgeting, you can model various what-if scenarios to adapt and react to changes in the business, new strategies, or support long-range plans. This includes changes to operating hours, new channels, new store openings, store closings, or different wage rates for specific periods.

With an intuitive AI-driven platform, you can model multiple what-if scenarios to create dynamic budgets and identify profit-optimised “best bet” labour decisions that balance cost and revenue.

To ensure precise and accurate budgets, you can also accommodate unique and complex standards and granular labour requirements, including multi-level compliance rules, diverse shift patterns, and wage and hour regulations calculations.

The Technology Behind Workforce Budget Planning

Most companies find the labour budgeting process labour-intensive and time-consuming. Manual processes often include enormous, fragile spreadsheets introducing errors or labour overages, costing large companies millions of dollars. It's challenging to create budgets that reflect the differences between stores.

The finance team’s budgets are typically top-down, treating all stores alike. They don't often account for the differences between stores; even when they do, they are usually inaccurate. Legion enables intelligent automation to create accurate demand forecasts for the budgeting timeframe, which are then used to generate budgets from the store labour models.

These bottom-up budgets reflect the nuanced labour needs of each store in the organisation and individually forecasted demand specific to that store. They provide a more realistic and grounded understanding of what will be scheduled during the execution phase of the budgeting cycle.

Here’s what you can do with automated technology like Legion Labour Budgeting:

• Leverage ML-powered demand forecasts and labour models to create labour budgets up to 18 months out.
• Model what-if scenarios by explicitly adjusting the inputs, such as sales, traffic, channel mix, and location variables, and directly modifying the total budget hours.
• Constrain the labour budget to a top-down number while retaining the allocation determined by labour demand, including the ability to protect hours at some locations.
• Automatically enforce the budget in weekly schedule generation.
• Ability to adjust budgets and keep financial goals tightly aligned with store execution.
• Leverage actual operational labour models.
• Manage budget adjustment and track budget approval.
• Use Legion forecasted demand or externally loaded demand.

Legion Labour Budgeting leverages existing operational configurations such as operating hours, labour models, and average wage rates. It makes modeling what-if scenarios easy and ensures operational inputs ground your labour budget.

Scenario planning and budgeting processes can also be streamlined with Legion Labour Budgeting. You can effortlessly download and upload data to Excel and tailor your financial planning with customizable budgeting templates and configurations.

Measuring the Success of Workforce Budget Planning

Not all workforce management software providers offer labour budgeting. Legion combines finance and operations by providing an end-to-end process within a single platform that seamlessly fits your existing budget process.

Once your labour budget is finalised, it can be set for execution and automatically enforced in the Legion Automated Scheduling module, ensuring your financial goals are tightly aligned with store execution.

These are some of the measurable results you can expect:

• Increase operational efficiencies by creating the perfect budget plans based on accurate, granular demand forecasts powered by machine learning and rooted in optimised labour plans.
• Improve business agility by creating dynamic budgets that can evolve by quickly modeling what-if scenarios or adjusting the total budget hours.
• Improve labour budget execution by automatically enforcing the budget in weekly schedule generation.
• Provide better visibility and deeper insights by tracking budgets to execution, quickly identifying gaps, and making adjustments.

maximise Labour Efficiency and Employee Engagement Today

Workforce budget planning is essential for retail companies with large workforces to manage costs, optimise staffing levels, and support strategic goals.

Legion Labour Budgeting does not replace your ERP financial planning system. Instead, it is designed to work with your ERP system by providing labour demand and budget.

Request a demo to see Legion Labour Budgeting in action and learn more about how we can help you create optimised labour budgets.