In early December, we will be updating how LivePlan handles employee-related expenses. This change brings additional options for Personnel entry, along with it come some important changes to how Operating Expenses are reported.
In this article:
Burden rate
LivePlan currently uses the term burden rate as a catch-all term for employee taxes, benefits, and other expenses. This can be a valuable tool for business forecasters, allowing them to calculate, at a glance, the actual cost of employing staff. Beyond wages or salaries, businesses often incur additional costs, such as payroll taxes, health insurance premiums, and retirement contributions. These costs will vary significantly depending on industry, location, and company policies.
Using a flat burden rate, business planners can estimate the total additional employee-related expenses that they will incur beyond just the salary. For example, if a company estimates its burden rate at 20%, it means that for every $1,000 paid in wages, an additional $200 is spent on taxes and benefits. This simplified calculation saves time, especially for small businesses or startups, by providing a quick and reliable estimate of total labor costs. In short, it allows easier budgeting and forecasting by helping businesses quickly forecast their total labor costs.
While the burden rate is undeniably helpful for quick calculations and rough estimations, its simplicity can sometimes limit its accuracy. A single percentage may not reflect the nuances of individual expenses, such as the fixed cost of health insurance premiums or variable payroll taxes that scale with wages. Additionally, businesses with diverse employee benefits or varying compensation structures may struggle to rely solely on a flat burden rate for precise planning.
As businesses grow or refine their financial strategies, more granular forecasting often becomes necessary. Itemizing expenses like retirement contributions or payroll taxes gives a clearer picture of total labor costs, ensuring accurate and actionable forecasts. This approach helps businesses account for expenses that don't always scale directly with wages, offering greater flexibility and clarity.
We'll release significant updates to this feature in LivePlan soon - continue reading for more details or view a brief rundown of how these changes will look.
Employee related expenses
The updated Employee Taxes and Benefits feature enhances the simplicity of the burden rate, providing greater flexibility and accuracy in forecasting. It retains the option to use a flat percentage for quick calculations while also introducing the ability to itemize specific costs such as payroll taxes, health insurance, and retirement contributions. These changes enable businesses to create forecasts more closely aligned with their actual expenses, whether they prefer a straightforward estimate or a detailed breakdown.
With this added flexibility, businesses can better tailor their forecasts to suit their unique needs. For example, itemized entries, using the Add Employee Taxes or Benefits entry, allow for precise tracking of fixed costs like health insurance premiums, which don't vary directly with wages. At the same time, the flat percentage method found under Change Employee Taxes & Benefits, which replaces the Change Burden Rate, remains ideal for estimating scalable expenses like payroll taxes. Combining these approaches allows you to create a forecast that balances simplicity with accuracy, helping you plan more effectively and make informed financial decisions. This update ensures that your forecasting tools grow alongside your business, accommodating both high-level estimates and the detailed planning required as operations become more complex.
The updated structure also aligns more closely with standard accounting practices, streamlining how Employee Taxes and Benefits are categorized and reported. By consolidating these costs under Operating Expenses, rather than splitting them between direct and indirect costs, the feature improves consistency across your Profit & Loss reports, benchmarks, and actual results. This makes comparing forecasts to real-world outcomes easier, giving you more precise insights into your financial performance. Whether preparing for growth, seeking funding, or optimizing your budget, this enhanced clarity ensures your forecasts remain actionable and relevant.