Salary Calculations

Occasional Contributor

Salary Calculations

Hi,

 

Can someone help me to understand the salary calculation, how it will calculated on the basis of merit increase%  

 

Thanks 

Shweta

Message 1 of 9
8 REPLIES 8
Community Boss

Re: Salary Calculations

Hi Shweta, 

 

The salary calculation is an interesting topic and at the same time quite different from company to company, and enev inside a company from country to country. Let me try to give you some general guidance

 

Companies are analyzing salary by components such as Base salary, Social Charges, Health Insurance, Allowances, Other benefits, etc which all of those adds up in the Full Salary Package. To calculate those costs, which most of the time represent the biggest part of the P&L, is needed to understand the way a salary is calculated, company policies and country-specific laws (this is specified by the subject matter experts). Anaplan itself has a model on AppHub regarding Workforce Planning so you can check it out in order to get familiarised with how salary components are calculated.

 

When calculating increases, there is quite some pre-word needed (workshops with the business) in order to get the correct salary base on which the increase is calculated. The starting point is what you take as a base: monthly or annual salary. Normally the base for increases does not include other salary components (e.g. allowances) so you need to ask to what base the increase is applied and whether other components of salary will be affected once with the salary rise (e.g social charges). 

 

Let’s suppose you want to calculate the salary increase for next year, and your base is the salary of this month. In this case, you need to calculate forward the base salary for your budget at the end of this year (usually what is the salary in Dec 2019) by including any potential increases happening this year, in order to get as close as possible to the base of next year, and use it in calculating monthly salary of Y+1, which is starting base for all the other components which depends on salary.

 

After you get the correct monthly salary of Y+1 (which includes the increase) then all the other dependent components will be affected. How the salary should look like for a 1000£ monthly salary, supposing there is a 10% increase in June:

 

Jan 20

Feb 201

Mar 20

Apr 20

May 20

Jun 20

Jul 20

Aug 20

Sep 20

Oct 20

Nov 20

Dec 20

1000£

1000£

1000£

1000£

1000£

1100£

1100£

1100£

1100£

1100£

1100£

1100£

 

If Social Charges are calculated as a % of the monthly salary, then on the month of increase and months after, the social charges will also change. Based on example above, social charges will look like this (calculated as 15% of base):

 

Jan 20

Feb 201

Mar 20

Apr 20

May 20

Jun 20

Jul 20

Aug 20

Sep 20

Oct 20

Nov 20

Dec 20

150£

150£

150£

150£

150£

165£

165£

165£

165£

165£

165£

165£

 

To wrap up and answer your question, the hardest part, in my opinion, is to get the salary increase calculation correct, and all the other components which depend on it will basically change according to the calculated monthly base, and the rest of the components will need to be defined based on their rules. I have just scratched the surface above, but I hope this is helpful and gave you some more understanding of the process!

Message 2 of 9
Occasional Contributor

Re: Salary Calculations

Hi Manuela,

 

Thank you for your quick response...

 

The information you have provided me has resolved my so many doubts, which i am supposed to ask..

It actually cleared the calculation part, however i am going to take this logic for my model creation..

 

will keep posted where ever i stuck again..

 

Really appreciated

 

Shweta   

Message 3 of 9
Community Boss

Re: Salary Calculations

Best of luck! It is indeed an entire process and what matters the most is how it is defined!

Message 4 of 9
Occasional Contributor

Re: Salary Calculations

Hi,

 

Sorry i am asking you a may be a silly question,

 

Is merit increase% will effect salary?

 

Reagrds:

Shweta

Message 5 of 9
Community Boss

Re: Salary Calculations

HI @Shweta , 

 

merit increase it does affect the salary, and as explain above, the base salary and other components. 

 

Can you give, however, more details of your case, so I can better help?

 

Thanks

Message 6 of 9
Community Boss

Re: Salary Calculations

Hi @Shweta,

 

Has the answer helped you in solving your issue? 

If so, can we close this topic or you have more questions? 

 

Cheers,

Manuela 

Message 7 of 9
Highlighted
Occasional Contributor

Re: Salary Calculations

Hi Manuela,

 

Yes, the issue has been resolved you can close the topic..

 

Thanks & Regards:

Shweta

Message 8 of 9
New Contributor

Re: Salary Calculations

Thanks a lot Manuela! Great and detailed explanation
Message 9 of 9