Posted by Paul Giese ● Mar 11, 2019 8:30:00 AM

Budgeting Biotech Headcount

Headcount is often the most expensive component of an early-stage biotech’s budget. Planning for new hires is more complicated than just including a salary and bonus percentage. Here are five other considerations to layer into headcount budget:

  1. Health benefits - insurance is a nuanced component to your people cost. Employee elections, including which insurance offerings (health, dental, vision) and the type of offering (single, couple, family, etc.) affect the company cost. Budgeting these costs by individual becomes overwhelming once the company is beyond a few employees. Instead, consider using an average monthly rate based on historical data and factor in changes to annual premiums. If you decide to budget by individual, be sure to only include the employer portion of the cost.
  2. Recruiter fees - for new hires, especially executives, a biotech will utilize a search firm to find the right candidate. This cost is usually a percentage (between 15% to 30%) of the new employees annual salary. This is paid before the start date or within the first few months of starting. Consider reducing this percentage for employees who come in via an employee reference. As a side note, this is a great reason to put in some financial incentives for current employees to refer people in their own network.
  3. Payroll taxes - payroll taxes will change throughout the year, depending on the individual's salary. Each state also has different tax laws. Keep things simple by using a flat rate based on historical information. If you don't have historical data, an 8% payroll tax rate is reasonable.
  4. Lab supplies spending - lab supply orders are correlated with the number of researchers ordering lab supplies. A common figure to assume is between $5K and $10K per month. When budgeting, you will need to know which employees and new hires will be ordering lab supplies in order to predict lab supply costs.
  5. Employer 401(k) match - if an organization offers a match on contributions to a 401(k) retirement account, you’ll need to know the percentage match amount and the annual maximum 401(k) contribution amount that can be found on the IRS website. For 2019, the maximum contribution amount an employee can make is $19,000. If an employer matches 50% of all contributions, the budget should include $9,500 of cost for an employee maximizing their contribution amount.

intheBlk - headcount graph

Modeling hiring costs in an Excel budget model is complicated, especially when additional analysis is required. If your biotech organization is looking to gain more insight and analysis in your hiring decisions, please contact intheBlk software to see how our tool can get you a better budget model.

Topics: Systems, Technology, Headcount, Budgeting

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