The goal of Personnel Cost Planning is to allow your firm to do comprehensive planning of personnel costs. This is best achieved when you use projected pay as a source of data.

Projected pay provides more freedom to identify costs that personnel systems typically cannot handle. For example, a manufacturing company may frequently have to replace equipment and therefore have to retrain its employees. This company might want to include the costs of retraining its staff in personnel costs.

If you use projected pay, your projections can include:

• vacancies

• organizational changes (that affect organizational units, work centers, jobs, and positions)

• other amounts that are not typically identified in personnel/payroll data (as in the example stated above)

Projecting costs and previewing future costs are not the same thing. When you preview costs, you are really assuming that the factors that contribute to costs - the number of employees, the pay structures - stay the same. When you project costs anticipated changes can be included in the calculations.

Some customers consider cost projections to be a statement of target costs. If you retain scenarios from one planning period to another, you can compare the target with the actual results (when they occur), to determine how accurate your projections were. In fact, for controlling purposes it is recommended that you do actual/target comparisons in the middle of the planning period.