How to Plan Headcount and Salary Budget for Next Year

A good manpower budget answers three questions: how many people will we have, what will they cost this year, and what will they cost per month by year end?

Step 1: Start from today's roles

List each role by department with current headcount and average CTC. Group similar people (18 CNC operators at about ₹3.6 lakh) instead of listing everyone, unless you want person-level detail.

Step 2: Add increments from the right month

If increments apply from April, the whole year carries the new salary. If they apply from July, only nine months do. Cost of current staff = headcount × CTC × (months at old salary + months at new salary × (1 + increment %)) ÷ 12.

Step 3: Phase new hires

New hires rarely join on day one. A hire expected in October costs six months this year. Add recruitment cost (job portals, consultants, onboarding) for each new hire.

Step 4: Add employer costs not inside CTC

Some companies quote CTC without group insurance, welfare costs or statutory items. Add them as a % on top so the budget isn't short.

Step 5: Allow for attrition

If 12% of people leave each year, you'll spend on replacement hiring even if headcount stays flat. Budget the recruitment cost for those replacements.

Step 6: Look at the year-end run-rate

Monthly cost at year end = year-end headcount × new CTC ÷ 12. This is next year's starting point. A budget that fits this year but doubles the run-rate needs a conversation.

A quick example

39 people today, 10 planned hires joining from July, increments averaging 8% from April:

• Current staff cost with increments: about ₹2.26 crore
• New hires for nine months: about ₹43 lakh including recruitment
• Year-end run-rate: about ₹23 lakh a month

Present it clearly

Show finance three numbers: total cost this year, cost of increments, cost of new hires. Then the run-rate. Decisions get easier when each lever has a price.

Check it during the year

Compare actual headcount and salary cost with the budget every month. If hiring is running behind, the budget will look healthy while work piles up; if it's running ahead, you'll see the overspend before year end. Update the plan once mid-year rather than letting it drift.

Our Manpower Cost & Headcount Budget Planner phases increments and new hires by month, adds employer costs and attrition, and shows cost by department and the year-end run-rate.