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Summary

Analyzing “what-if” scenarios of Personnel Costs requires you to have a complete visibility on employees’ total cost and the assumptions you’ve to analyze the impact on overall cost. Personnel Cost Planning & Simulation – a tool within SAP HR applications, provide you the flexibility of storing employees cost at one place, creating various cost plans based on the assumptions and thus depicting a thorough picture of your workforce costs for each of your assumed scenario. A brief description of the tool is given in this blog, providing a scenario in which PCP / similar tools are required, an example, assessment criteria of a good planning tool and PCP capabilities.

Scenario

To remain competitive, businesses sometime merge their operations and at other times they expand their organizational structures. A scenario often observed in today’s businesses is a continuous change in their organizational structure; sometimes new positions are added in the hierarchy, positions are moved to another organizational unit or whole organizational unit is changed. In any of the given scenario, prior to a decision, analyzing the cost of planned organizational structure could help organizations in ‘right’ decision.

Personnel Cost Planning & Simulation

Here SAP’s Personnel Cost Planning & Simulation tools come into picture. With the tool you can collect cost relevant data of your employees as well as other organizational objects and can create as many cost plans as you like with different assumptions 

Example

If 10 more ‘SAP Consulting’ positions are added in current structure, how much these position would cost to organization? To have a sensible idea of future costs of an organizational unit, we need to have an average cost of one consultant which should be multiplied by number of positions we’re planning to have in our new structure. Theoretically we can see the equation very easy, however, when it comes to ‘Simulation’ where we need to compare different cost scenarios, we’ve to be more flexible and not only getting average cost of one position & multiplying it with number of planned positions.

The scenarios could vary from adding these positions within one organizational unit or splitting these in more organizational & cost units. And in all cases, PCP helps you a lot.

Good Planning Tool: Q & A

Q. What type of costs do you store for your employee?

A. Basic Pay, Recurring Payments & Deductions, Additional Payments etc.

Q. What additional costs do you need to consider while planning the personnel costs?

A. Training as the budget is mostly allocated at corporate level

Q. Does the master data give a true picture of an employee’s cost?

A. Not necessarily, some adjustments take place in Payroll and therefore Payroll could give a better view of an employee’s cost

Q. What to consider while planning costs of a vacant position?

A. You may have the ceiling amounts; max and min, in Planned Compensation for a vacant position. If not, you still can estimate the cost of position by comparing it with similar position holders.

Q. Can different data be used for planning?

A. Yes, you’re planning to change ONLY the Basic Pay, you can just use the Basic Pay master data of employees to plan accordingly.

Tool’s Capabilities

As you can see above, the Q & A, for a good cost planning for workforce, a tool is needed which can

  • Capture different types of employee costs at individual as well as organizational level.
  • Use different modes as a basis of cost planning.
  • Identify the way-around to determine costs of organizational objects.

What?

PCP does this all for you. You can

  • Define assumptions; increase / decrease in percentage or a fixed amount.
  • Gather Employees & Organizational Objects’ Data in specific Data Collection Methods.
  • Edit & adjust the collected data.
  • Create cost plans on the assumptions.
  • Using the cost plans by posting these to controlling

I think I can write again in another blog the “how” aspect of the tool to describe the business case. In the meantime if you’ve some comments please feel free to share.

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