7.3 Staff costs
The staff time and staff-related costs need to be calculated. These include salaries, taxes, holidays, overtime, training, travel and subsistence, and accommodation for the number of staff for the time they will be needed. This raises all sorts of questions about the basis on which staff are costed and the relationship of the project budgeting system to other budgets and costing systems in the organisation. The basic assumptions underlying allocation of resources need careful consideration early in a project, particularly if there is likely to be substantial investment of staff time in the start up stages of operations.
One issue is that of how to treat the use of existing staff and other resources that are to be allocated to the project on a temporary basis. It's common to overlook these opportunity costs, or at least those when the project is a small part of any individual's time because leaving out these costs will make the project look more attractive.
However, if the opportunity cost of existing staff time is not calculated in some way, there is a danger of overlooking this cost when these staff would normally be working on the core work of the organisation. This analysis would show when it would be less costly for an organisation to hire staff specifically to work on a project, rather than to redeploy existing staff. For example, situations occur when the skill requirements would mean training existing staff before they could carry out the project tasks – probably less efficiently and with more mistakes, due to lack of experience – than if experienced outsiders were used. This, of course, raises another issue, because part of the purpose of the project may be to train staff to be more skilled, in which case the cost of training is a necessary project cost.
Staff costs can be estimated by analysing the project into tasks that staff must complete, working out staff requirements in terms of the quantity and expertise, and finding out rates of pay, taxes and other costs. Organisations that regularly work on projects often have standard approaches to calculating and costing staff time. Projects of a construction or engineering nature (for example, roads, houses, office buildings or ships) may be unique, but most of their components are not, being replications of previous work. The uniqueness derives from the mixture of components and how they are to be combined. Projects of a human service nature (e.g. schools, hospitals) often use formulae to develop operations costs. These formulae include ratios of staff to clients (for example, the number of teachers to students) and of one staff group to another (clinical staff to administrative staff).