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ami-shastri
Hello Seniors, How do you calculate the salary expense of the employees for the financial year? How to Calculate Attrition Ratio?
raghunath_bv
158

Hi Ami Shastry,

Calculating Salary Expense for the Financial Year
To calculate the salary expense for the employees for the financial year, follow these steps:
1. Determine Gross Salaries: Sum up the gross salaries (basic pay + allowances) of all employees for each month.
2. Include Bonuses and Incentives: Add any bonuses, incentives, or other variable pay components paid to employees throughout the year.
3. Add Benefits and Perks: Include the cost of benefits and perks such as health insurance, retirement contributions, and other employee benefits.
4. Account for Payroll Taxes: Include the employer's portion of payroll taxes such as Social Security, Medicare, and any state-specific taxes.
5. Adjust for Changes in Staff: Account for employees who joined or left the company during the year. Only include the salary expense for the months they were employed.
6. Sum Up Monthly Expenses: Add the monthly totals to get the annual salary expense.
Annual Salary Expense=∑(Gross Salaries + Bonuses + Benefits + Payroll Taxes)\text{Annual Salary Expense} = \sum \text{(Gross Salaries + Bonuses + Benefits + Payroll Taxes)}Annual Salary Expense=∑(Gross Salaries + Bonuses + Benefits + Payroll Taxes)
Calculating Attrition Ratio
The attrition ratio, also known as the turnover rate, measures the rate at which employees leave a company within a specific period. Heres how you can calculate it:
1. Identify the Time Period: Decide the time period for which you want to calculate the attrition ratio (usually annually or quarterly).
2. Count the Beginning Workforce: Note the number of employees at the start of the period.
3. Count the Number of Leavers: Note the number of employees who left the company during the period.
4. Calculate the Average Workforce: This is often done by averaging the number of employees at the start and end of the period.
Average Workforce=(Employees at Start of Period+Employees at End of Period)2\text{Average Workforce} = \frac{(\text{Employees at Start of Period} + \text{Employees at End of Period})}{2}Average Workforce=2(Employees at Start of Period+Employees at End of Period)
5. Calculate the Attrition Ratio:
Attrition Ratio=(Number of Employees who Left Average Workforce)ื100\text{Attrition Ratio} = \left( \frac{\text{Number of Employees who Left}}{\text{Average Workforce}} \right) \times 100 Attrition Ratio=(Average WorkforceNumber of Employees who Left)ื100
Example Calculations
Salary Expense Example
 Monthly Gross Salaries: Rs.500,000
 Bonuses and Incentives (Yearly): Rs.200,000
 Benefits and Perks (Yearly): Rs.100,000
 Payroll Taxes (Yearly): Rs.50,000
Annual Salary Expense=(500,000ื12)+200,000+100,000+50,000\text{A nnual Salary Expense} = (500,000 \times 12) + 200,000 + 100,000 + 50,000Annual Salary Expense=(500,000ื12)+200,000+100,000+50,000 Annual Salary Expense=6,000,000+200,000+100,000+50,000\text{Annu al Salary Expense} = 6,000,000 + 200,000 + 100,000 + 50,000Annual Salary Expense=6,000,000+200,000+100,000+50,000 Annual Salary Expense=6,350,000\text{Annual Salary Expense} = 6,350,000 Annual Salary Expense=6,350,000
Attrition Ratio Example
 Employees at Start of Period: 200
 Employees at End of Period: 180
 Number of Employees who Left: 40
Average Workforce=(200+180)2=190\text{Average Workforce} = \frac{(200 + 180)}{2} = 190 Average Workforce=2(200+180)=190 Attrition Ratio=(40190)ื100≈21.05%\text{Attrition Ratio} = \left( \frac{40}{190} \right) \times 100 \approx 21.05\%Attrition Ratio=(19040)ื100≈21.05%
These calculations help organizations manage and plan their human resources effectively.

Thanks

From India, Bangalore
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