Build the pre-hire scenario in order
Pre-hire decision sequence
- State the business need, measurable role outcome and evidence of the capacity gap. (not complete)
- Choose the planning period, proposed start month, active months and whole role count. (not complete)
- Enter base compensation and user-owned employer on-cost assumptions separately. (not complete)
- Keep contractor and overtime alternatives as explicit period budgets. (not complete)
- Compare total labour budget with revenue or contribution on the same period, currency and tax basis. (not complete)
- Test onboarding delay, available cash and a lower-revenue case. (not complete)
- Compare overtime, workforce mix and delayed start without assuming one option is legally available. (not complete)
- Stop before opening the role if the need, authority, classification, funds or downside boundary is unresolved. (not complete)
total labour budget = ฮฃ[role count ร (annual base cost + annual on-cost) ร active months รท 12] + contractor budget + overtime budget
- role count
- Whole people in the user scenario (headcount) โ user scenario
- annual base cost
- User-entered annual base compensation per person (currency per person-year) โ business record or user scenario
- annual on-cost
- User-entered annual employer cost per person; no statutory default is supplied (currency per person-year) โ business record or user scenario
- active months
- Whole months the role is active in the 12-month budget (months) โ user scenario
- contractor budget and overtime budget
- Separately declared alternatives or supporting spend for the same period (currency per period) โ business record or user scenario
The tool accepts up to 12 role rows and calculates the scenario. The article structures the evidence and stop points.
Work a mid-period role and lower-revenue sensitivity
One fictional role beginning halfway through the period
All outputs are generated by the Labour Budget Scenario engine in generic currency units. They are not pay, on-cost, demand or hiring benchmarks.
| Line | Assumption | Period amount |
|---|---|---|
| Role base cost | 1 role ร 72,000 annual ร 6/12 active months | 36,000 |
| Entered on-cost | 1 role ร 18,000 annual ร 6/12 active months | 9,000 |
| Engine employee budget | Prorated base plus entered on-cost | 45,000 |
| Contractor budget | Separate user assumption | 12,000 |
| Overtime budget | Separate user assumption | 3,000 |
| Engine total labour budget | Employee + contractor + overtime | 60,000 |
| Scenario | Period revenue | Labour budget | Budget rate | Gap to entered 20% target |
|---|---|---|---|---|
| Base user scenario | 300,000 | 60,000 | 20% | 0 |
| Lower-revenue sensitivity | 240,000 | 60,000 | 25% | 12,000 |
Translate the capacity gap into coverage before choosing overtime or a hire
Record required coverage hours for the planning period, then compare them with available productive hours on the same service and time boundary. Uncovered hours identify a delivery gap; excess hours identify entered capacity beyond that requirement. Neither result determines a staffing action until timing, skills, service level and cash are checked.
| Coverage result | Interpretation | Next workflow |
|---|---|---|
| Required coverage hours exceed available productive hours | The scenario has uncovered hours on the declared period and service boundary. | Use Overtime vs Hire to compare the entered temporary-overtime and added-capacity cases. |
| Available productive hours exceed required coverage hours | The scenario has excess hours; do not assume they create demand or revenue. | Recheck workforce mix, timing and whether the capacity is genuinely redeployable. |
| Required and available hours are aligned | The declared coverage fits, but absence, rework and demand downside remain separate risks. | Carry the aligned hours into the period labour budget and dated cash case. |
Calculate coverage before comparing capacity options
- Shift Coverage Cost Planner
Choose a shift pattern that covers required hours with explicit entered loadings
- Overtime vs Hire Comparison
Compare overtime and hire cost at an entered demand level, including capacity and exact overtime-cost contribution
Stop before opening the role when a core assumption is unresolved
| Decision point | Evidence required | Next workflow or stop |
|---|---|---|
| Is the need a capacity gap? | Required hours, service level, backlog or role outcome | Headcount Mix Planner if the workforce mix is unresolved |
| Is demand temporary? | Duration and downside workload scenario | Overtime vs Hire Comparison |
| Can cash carry the start and onboarding period? | Dated receipts, payments and buffer | 13-Week Cash-Flow Forecast |
| Are classification or employment obligations unclear? | Applicable contract, law and qualified advice | Stop; do not use the planner as a legal determination |
Phase onboarding cash and productive capacity separately
A hire can create cash outflows before the entered productive-capacity case is reached. Build the ramp in dated blocks: record the labour cash outflow, new-member productive hours, manager enablement hours and any supported receipt assumption separately. A full salary period is not evidence of full productive output.
| Ramp block | Entered labour cash outflow | Entered productive capacity | Manager enablement demand | Cumulative labour cash outflow |
|---|---|---|---|---|
| Weeks 1โ4 | 8,000 CU | 100 of 400 hours (25% scenario) | 60 hours | 8,000 CU |
| Weeks 5โ8 | 8,000 CU | 200 of 400 hours (50% scenario) | 40 hours | 16,000 CU |
| Weeks 9โ12 | 8,000 CU | 300 of 400 hours (75% scenario) | 20 hours | 24,000 CU |
| Branch | Entered change | Decision consequence |
|---|---|---|
| Slower ramp | Weeks 9โ12 capacity remains 200 hours | Do not count the missing 100 hours as contribution or receipts. |
| Higher enablement | Manager demand remains 40 rather than 20 hours in weeks 9โ12 | Name the manager work displaced or leave the capacity gap unresolved. |
| Later receipt | Supported customer receipt moves outside week 12 | The labour cash outflow still occurs; carry the dated gap into the cash forecast. |
Separate period cost, contribution threshold and dated cash
- Labour Budget Scenario Planner
Translate role headcount, active months, compensation, contractor and overtime assumptions into a period labour budget
- Hiring Break-even Planner
Test a hire against billable contribution
- 13-Week Cash Flow Forecast
Forecast weekly closing cash, the first shortfall and the funding gap across a 13-week operating horizon
Labour-budget questions
- Does a budget rate show that the business can afford a hire?
- Not alone. It is a period-aligned scenario. Review contribution, available cash, start timing, onboarding, demand downside and obligations before deciding.
- Which employer on-cost rate should be used?
- Margin101 supplies no statutory or country default. Enter verified costs for the applicable arrangement and obtain qualified payroll, tax, accounting or legal advice where required.
- Is overtime, a contractor or a hire always cheaper?
- No. Cost, productive hours, duration, availability, quality, supervision and legal classification differ. Compare bounded user scenarios and retain non-cost constraints.
Methodology source
- Margin101 Labour Budget Scenario methodology โ Margin101: Prorated role-budget formula, engine fixture, units and user-assumption boundaries.