I’ve seen companies that sometimes do a nice job splitting out their salary and wage cost among various different departments, however in some cases they will do it fine for some departments, but leave too much bunched together in administrative. So, that’s the first point of this note.

But, there’s more. Sometime companies get the salaries right, but then they leave the fringes all down in the pot in the administrative area. Things such as:

1. FICA and Medicare payroll taxes

2. Unemployment taxes.

3. Medical insurance.

4. Disability or other insurance.

5. 401K (inaudible).

6. Other fringes.

To really get a full number on the payroll cost by department, get the fringes allocated up there too among the different departments. Don’t overload the administrative department with costs that really pertain to different departments up above. Do this allocation and you’ll have a much better picture of what’s really being spent on your payroll by area.

Jon Paul, MBA, CPA, CMC, CM&AA

President, Value Added Finance Resources
Bringing new insights on results and maximizing company value