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Payroll is a key concept for any company as it represents the total gross compensation paid to all employees over a given period. This includes base salaries, bonuses, and overtime, but excludes benefits in kind (employer contributions are included in the calculation of so-called loaded payroll, but not in that of gross payroll).
If you master this concept, you'll have a better understanding of your company's financial (and strategic) aspects. Shall we take a closer look?
👉🏼 Want to know more about the definition of payroll? We go further in this article: what is payroll? Definition and explanations.
Don’t confuse: payroll and workforce. Workforce is the number of employees in your company over a consecutive 12-month period. Payroll focuses on the total (direct and indirect) cost related to employees.
To summarise:
Example: a company can have a stable workforce but see its payroll increase due to salary raises or added bonuses.
Payroll has multiple stakes:
Each month, you must declare your company's payroll via the Nominative Social Declaration (DSN). This declaration allows the calculation of social contributions you need to pay. Payroll also indirectly influences other fiscal obligations, such as the apprenticeship tax and grants allocated to the Social and Economic Committee (CSE).
Payroll is the largest budgetary expense for some companies, potentially representing up to 80% of costs. Its financial dimension is thus very significant.
Analyzing your payroll in relation to your turnover helps evaluate the budget dedicated to human resources. Indeed, salaries and social charges often represent a large portion of company expenses. Proper management of this payroll is therefore essential to balance growth and profitability.
For this, you can calculate the payroll rate, which corresponds to the weight of your payroll on your turnover.
👉🏼 To better understand how to manage your HR budget considering payroll, you can read our article: how to manage your HR budget considering payroll.
Knowing your payroll helps determine the right time to recruit and set attractive and fair salaries. This contributes to attracting and retaining talent within your company. Payroll also impacts, through your remuneration policy, employee motivation and productivity. Not to be overlooked.
Monitoring your payroll helps anticipate and optimise this expense while keeping the company's strategic objectives in mind (a remuneration strategy below the market can negatively impact retention, for example), regulatory constraints (such as minimum wage increases), or employees' raise requests.
Calculating payroll is simple if you know the elements to include.
Here is the basic formula:
Gross payroll = salaries + bonuses + overtime
Benefits in kind and employer contributions are excluded from the gross payroll calculation. If you choose to include employer contributions, we talk about loaded payroll.
👉🏼 Several calculations are possible to estimate your payroll. We have detailed them in the following articles:
The payroll rate helps understand the weight of salaries in your turnover. You can, for example, use it to compare yourself with other companies in your industry. The idea is to find the right balance between profitability and the attractiveness of your remuneration policy.
📊 Here’s how to calculate it:
Payroll rate = (annual payroll / annual net turnover) x 100
As mentioned earlier, payroll can represent up to 80% of your company's expenses. Managing it well is (really) strategic.
Some tips:
To attract and retain talent, it’s essential to set interesting, market-adapted, and flexible salaries. A good salary is consistent among employees in equivalent positions, attractive compared to the market and potential competing offers, and possibly complemented by a bonus (also known as variable pay).
Managing payroll means finding a balance between the salaries paid and the company's profitability. A well-thought-out salary grid contributes to employee motivation and company profitability. For this, it needs to be motivating (paying your employees 25% below the market is not often a very long-term strategy), profitable (but paying them 25% above, to the detriment of your runway, isn't either), and the number of employees should be sufficient to avoid an excessive workload.
Every dashboard depends on the objectives of the company that sets it up. However, there are some common indicators: payroll and its rate (in year N and N-1 to evaluate its evolution), the average cost of an employee, the number of overtime hours, the total workforce...
Capped payroll is calculated only from annual gross salaries within the limits of social security ceilings. This helps determine adjusted contributions for the company.
To reduce payroll, you can consider freezing hires, freezing salaries, not granting exceptional bonuses, not renewing temporary contracts, or laying off employees in compliance with legal conditions. Other options include implementing part-time work.
Understanding and effectively managing payroll is essential for the sustainability of your business. By regularly calculating this payroll and using the appropriate tools, you can optimise your costs and make informed decisions for the future.