Planning Personnel Costs for 2027: What SMEs Need to Consider Now

“We already know how much our employees earn. Why do we need to recalculate our personnel budget every year?”

It’s a fair question. After all, salaries are known, headcount is relatively stable, and there may be no major changes on the horizon. So why not simply take last year’s figures, add a small increase, and call the 2027 budget done?

Unfortunately, it’s not quite that simple.

Personnel costs involve much more than monthly gross salaries. Employer contributions, one-off payments, variable compensation, and planned hires all affect the budget. So does the timing of employees joining or leaving the company.

For start-ups and small and medium-sized enterprises (SMEs) in particular, even a handful of staffing changes can have a significant financial impact.

To plan personnel costs for 2027 realistically, businesses need to consider previous expenditure, anticipated changes, and future staffing requirements together.

The goal isn’t to predict every development down to the last euro. What matters is building a personnel budget based on sound assumptions that provides a reliable foundation for business decisions.

Why Businesses Should Start Planning Personnel Costs for 2027 Early

For many businesses, budget planning begins with a review of the current financial year. What costs have been incurred? Which changes are already confirmed?

This is a sensible starting point. However, simply carrying the same figures forward into 2027 isn’t enough.

One specific example is Germany’s statutory minimum wage, which will increase to €14.60 gross per hour on 1 January 2027. Businesses employing staff at the minimum wage will need to factor this change into their calculations.

Companies should also consider the applicable social security contribution thresholds for 2027. Changes to these thresholds, in particular, can affect employer costs. For reliable calculations, businesses should therefore use the applicable figures and actual payroll data.

Internal developments also play a role, including new hires, replacement recruitment, changes in working hours, and additional compensation components.

Growing businesses face another important question: What staffing capacity will be needed to achieve their business objectives?

A company planning to take on new client projects, for example, must also account for the employees required to deliver them.

A well-prepared personnel budget is therefore more than a breakdown of costs. It is an essential part of business planning.

Personnel Costs 2027: What Expenses Should SMEs Budget For?

When planning personnel costs for 2027, SMEs should account for more than gross salaries. Employer contributions, variable compensation, and planned staffing changes must also be included. Additional expenses such as recruitment, training, and equipment may also be relevant.

For a comprehensive calculation, it helps to distinguish between three cost categories.

Direct Compensation: More Than Monthly Salaries

Direct compensation includes gross salaries, hourly wages, and additional payments such as bonuses, commissions, one-off payments, and regularly paid allowances.

Variable compensation, in particular, is often estimated too broadly during annual budget planning.

Consider a company that pays its sales employees performance-based commissions. The amounts depend on business performance.

If the company budgets only for fixed salaries, it may underestimate its costs. On the other hand, assuming that every employee will receive the maximum possible commission could result in an unnecessarily high budget.

A better approach is to separate fixed and variable compensation and use realistic assumptions for the variable components.

Employer Costs: What Comes on Top of Gross Salaries?

In addition to employee compensation, businesses incur further employment-related expenses. These primarily include employer social security contributions and other applicable payroll-related charges and levies.

For an initial estimate, applying a standard percentage on top of gross salaries can be useful. However, this does not replace an accurate calculation.

Actual costs depend on several factors, including salary levels, social security contribution thresholds, employment arrangements, and individual insurance circumstances. Variable compensation may also be subject to social security contributions.

Reliable planning should therefore be based on actual employer costs from payroll records wherever possible, while also accounting for known changes in 2027.

Indirect Costs: Expenses That Are Easy to Overlook

Recruitment, employee training, additional benefits, and equipment for new hires also generate costs.

If a company plans to hire three new employees, budgeting for their salaries alone is not enough. Job advertisements, recruitment support, and technical equipment can all add to the overall expense.

It is important to distinguish between personnel expenses in the accounting sense and a broader personnel budget that includes additional HR-related expenditure.

If these costs are already included in other business budgets, they should not be counted twice.

New Hires and Departures: Why Timing Matters

“We’re planning to hire two additional employees next year.”

That’s useful information for workforce planning, but it isn’t enough to prepare an accurate budget.

There is a significant financial difference between filling a position in January and filling it in September.

Consider a position with a monthly gross salary of €4,000. If the employee starts on 1 September 2027, the company initially incurs four months of salary costs, totalling €16,000.

Applying a simplified estimated employer cost supplement of 23% brings the total to €19,680.

If the employee starts in January instead, the annual cost would be €59,040. That’s a difference of €39,360.

The 23% supplement is used for illustrative purposes only. One-off payments and additional costs are not included.

However, hiring later is not automatically the more economically sensible decision. If the business lacks the capacity it needs, projects may be delayed, existing employees may face additional pressure, and anticipated revenue may take longer to materialise.

The same principle applies to employee departures. If someone leaves halfway through the year, ongoing costs may decrease for the remaining months. However, final payments, replacement recruitment, and any overlap between employees must also be considered.

Planning on a month-by-month basis makes it easier to see when costs arise and how staffing decisions affect the company’s finances.

Three Scenarios for Personnel Costs in 2027

No one can predict with certainty how the coming financial year will unfold. That’s why it makes sense to consider two alternative scenarios alongside a baseline budget.

Scenario 1: Stable Workforce

Headcount remains largely unchanged, with recruitment primarily focused on replacing departing employees.

The budget reflects existing employment arrangements and known changes, such as previously agreed salary adjustments.

This scenario serves as a baseline for comparison.

Scenario 2: Growth

The company plans to create additional positions to take on new client projects or strengthen existing teams.

Alongside salary costs, the budget should account for realistic hiring dates and any associated one-off expenses.

Equally important is understanding how the additional capacity will contribute to business development. After all, hiring someone is not simply an expense. It can also be what makes further growth possible.

Scenario 3: Cost Pressure

When business conditions are uncertain, a more cautious approach to workforce planning may be appropriate.

For example, a company might temporarily leave vacant positions unfilled or postpone additional hires until specific business objectives have been achieved.

However, it is essential to assess whether the remaining workforce has sufficient capacity to handle its responsibilities reliably. Existing payment obligations must also continue to be met.

Example: A 2027 Personnel Budget for an SME with 25 Employees

A simplified calculation illustrates just how much individual staffing decisions can affect the overall budget.

Let’s consider a company with 25 employees earning an average gross monthly salary of €3,800.

The company also budgets €30,000 for variable compensation. To estimate employer costs, we apply a 23% supplement to total compensation.

This percentage is purely an assumption for the example. Actual employer contributions must be calculated individually, particularly because social security contribution thresholds can affect the amounts payable.

Based on these assumptions, the company would need approximately €1.46 million for its extended personnel budget.

But how would the figures change under the three scenarios?

In the growth scenario, the company hires two additional employees in July, each earning a gross monthly salary of €3,800. It also incurs €10,000 in one-off recruitment and equipment costs.

In the cost-pressure scenario, a position that becomes vacant in July remains unfilled for the rest of the year. No additional departure-related costs are assumed.

All other cost categories remain unchanged.

The difference between the stable workforce and growth scenarios is €66,088.

This shows the additional expenditure associated with the planned expansion under the assumptions used. Whether the investment is worthwhile depends on the business value created by the additional employees.

The lowest-cost scenario is therefore not necessarily the most economically sensible one.

How SMEs Can Calculate Personnel Costs for 2027

Effective workforce budgeting doesn’t have to be complicated. The key is to ensure that the assumptions behind the figures are clear and transparent.

Start with an up-to-date overview of all employment arrangements, including salaries, working hours, compensation components, and employer costs.

Next, add any known changes, such as agreed salary adjustments, planned departures, and approved new hires.

Businesses should distinguish between confirmed, planned, and optional expenditure. A new hire who has already received an offer should be treated differently in the budget from a potential additional position that is still under discussion.

Based on this information, the budget can be prepared month by month and supplemented with different scenarios.

It is also helpful to document the key assumptions. This makes it easier to understand later why certain costs were included and which developments remained uncertain.

Don’t Confuse Personnel Budgets with Cash Flow

For start-ups in particular, the timing of actual payments is just as important as the annual budget.

A company may have sufficient funds allocated to personnel costs over the full year and still experience cash flow pressure in individual months.

This can happen, for example, when substantial bonus payments are due before expected customer payments have been received.

Personnel budgeting and cash flow planning should therefore be aligned. Expenses recognised for accounting purposes and actual cash outflows may occur at different times.

Regularly Compare Budgeted and Actual Costs

The work doesn’t end once the budget has been approved.

Throughout the financial year, businesses should regularly compare planned figures with actual expenditure.

What matters is not only the size of any variance, but also its cause. Was a position filled later than expected? Were variable payments higher than anticipated? Or have employer costs changed?

Understanding these differences allows businesses to make further staffing decisions based on up-to-date information.

What Workforce Planning Mistakes Should SMEs Avoid?

One common mistake is treating planned staffing decisions as though they have already been confirmed.

For example, if a company budgets for a new employee to start in March even though recruitment hasn’t begun, that uncertainty should be reflected in the budget.

Overly optimistic assumptions about cost savings can also cause problems. Leaving a position vacant may initially reduce ongoing expenditure. However, if this leads to additional overtime, external support costs, or project delays, the financial benefit may be smaller than expected.

Another mistake is failing to coordinate workforce planning between management, HR, and finance.

Management may anticipate the need for additional capacity to support growth, while HR understands realistic recruitment timelines and the finance team knows what funding is available.

Only by bringing this information together can a company create a personnel budget that is both financially sustainable and operationally realistic.

Frequently Asked Questions About Personnel Cost Planning for 2027

Conclusion: Plan Personnel Costs for 2027 Realistically, Rather Than Simply Increasing Last Year’s Figures

A reliable personnel budget cannot be created by simply carrying forward previous salary expenses.

A realistic overall picture only emerges when compensation, employer contributions, additional costs, and planned staffing changes are considered together.

For start-ups and SMEs, the priority isn’t developing complicated financial models. It’s using transparent assumptions, realistic scenarios, and regular reviews.

Above all, workforce planning should answer one central question:

What employees and staffing capacity does the business need to achieve its goals, and how can these resources be planned in a financially sustainable way?

A good personnel budget cannot eliminate uncertainty. But it can provide the clarity needed to make informed decisions.

Support with Personnel Cost Planning for 2027

In smaller businesses, day-to-day responsibilities often leave little time to bring together employee data, planned staffing changes, and actual employer costs.

We help start-ups and SMEs organise the HR data they need, manage staffing changes proactively, and establish a reliable foundation for personnel budget planning.

Our support can also include ongoing HR administration and payroll services, depending on your company’s needs.

Looking to plan your personnel costs for 2027 with greater confidence? Let’s talk about your HR challenges.