Budgeting, Biotech Industry

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 the headcount budget:

  1. Health benefits - insurance is a nuanced component of your employee cost. Employee elections, including insurance offerings (health, dental, vision) and the type of offering (single, couple, family), affect the company cost. Budgeting these costs by an 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 the individual, only include the employer portion of the cost.
  2. Recruiter fees - for new hires, especially executives, biotech will utilize a search firm to find the right candidate. This cost is usually a percentage (between 15% to 30%) of the new employee's annual salary. This expense 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 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. An 8% payroll tax rate is reasonable if you don't have historical data.
Additional Reading: Four questions every biotech team should answer before implementing NetSuite
  1. Lab supplies spending - lab supply orders correlate with the number of researchers ordering lab supplies. A typical figure is between $5K and $10K per month. When budgeting, you will need to know which employees and new hires will be ordering lab supplies to predict lab supply costs.
  2. 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. Budget owners can find this information on the IRS website. For 2019, an employee's maximum contribution amount is $19,000. If an employer matches 50% of all contributions, the budget should include $9,500 of costs for an employee to maximize their contribution amount.

Modeling hiring costs in an Excel budget model is complicated, especially when additional analysis is required.

Is your biotech organization outgrowing QuickBooks? If so, contact us to learn how intheBlk consulting can be a resource for implementing NetSuite.

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