“Wallet of the main staff”
Where, nevertheless, is the critical boundary of wage costs, which is not recommended to be crossed over? If you do not have a ready answer, do not be discouraged, for you are not alone. I asked this question to many entrepreneurs, economists and “personnel managers” and at best I received the answer that the company’s expenses on the salaries of all personnel should not exceed …
I will not voice the answers, because “some in the forest, some for firewood.” Firstly, there is no common understanding of which indicator to use in calculations. Someone considers “from revenue”, someone “from cost”, and someone “from profit”. Secondly, most entrepreneurs accept workers and accordingly pay wages based on needs (in their opinion), and not business opportunities.
In practice, it looks something like this. I have (the entrepreneur thinks) so many cars, machine tools, and other assets, so I need to hire so many people of such and such professions. I also need an accountant (lawyer, marketer, advertiser, etc.), because without them this, this and that will not be done. Yes, I completely forgot – I need a secretary, otherwise the business will not look solid.
After compiling a list of necessary people, each is assigned its own “price”, sometimes according to market monitoring, sometimes “off the head”. You think I’m joking? Not at all. I personally observed such processes of determining the need for personnel and wages. And not only among novice entrepreneurs, but also those who, as they say, already have experience. Moreover, if the former act this way out of inexperience and ignorance, the latter, worse than that, are sincerely convinced that they are making the right decision, since they have experience, intuition, and so on.
The Five Wallets rule offers us a completely different approach to determining (planning) wage costs and the number of employees. We have already said that any business creates some kind of its own value, which must pay the cost of all the resources involved for its creation, including the cost of labor resources. Moreover, the Five Wallets rule divides labor resources into two groups: the main production personnel directly involved in the process of creating value, and personnel who create the conditions and manage the process (administrative and managerial). The entrepreneur’s tasks are “extremely simple” and are as follows:
a) determine the maximum possible size of wallets (wage fund) from the value created or planned to be created;
b) to calculate how many workers the business is able to pay wages that are adequate to the requirements and obligations imposed on them.
Many of you may have already dealt with the solution of the first problem by reflecting on abstract “home” examples. In principle, economic education is not necessary here; it is enough to connect logic and common sense. Let’s recall the task published in the last issue. You have created a business in the service sector, let it be digging holes or a hairdresser – it does not matter. It is important that the employee whom we hired for work knows the cost of one service – 1000 rubles.
Question: for what minimum payment does the employee agree to do this work and what maximum are you willing to pay him? We find a solution by selection or iteration, as economists and mathematicians say. Will an employee agree to do what costs 1000 for 100 rubles? In a market economy in the absence of totalitarian instruments of forced labor, there is definitely no. And I will not agree for two hundred, as there are options for alternative employment (labor market).
And you, as an entrepreneur, are unlikely to agree to pay 900 rubles for this work, because you need to reimburse the investments made in this business, pay for the current expenses of the business, and you would like to “leave” something. And hardly pay 800 rubles. Seven hundred is possible, but not for everyone, but only for a very, very, very qualified employee. But in this case, the employee already becomes for us a “star”, as we said in the last conversation, or the value of the created value.
If the employee is “standard”, replaced by another without prejudice to the case, then you are likely to “agree” on 30-35% percent, i.e. about 1/3 of the value created. It is this indicator that is the threshold amount that a business can pay to attract the main production workforce. And it doesn’t matter if you have one employee or ten, 33.33% of the created value – this is the wallet of the main staff! With all taxes, fees and bonuses.
Knowing the entire volume of this wallet, you can easily calculate how many people you can attract for this money. Suppose your business creates a value of 300 thousand rubles a month. The maximum amount of expenses that you can use to pay for the work of the main staff is 100 thousand rubles. We subtract from this salary calculation (26%), personal income tax (13%) – 69 thousand rubles “left” will remain.