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A project budget includes fixed and variable costs. In most cases (especially in weak matrix and pure functional organizations) salaries of project members are variable costs. In order to calculate project budget the project manager has to know the numbers. It means that he/she has to know how much his/her colleagues earn monthly. In most organizations this information is private. How to resolve this conflict?

9

We use three 'profile' rates (High, medium, Low). It is an approximation of the total (hourly) cost of an employee (not only salary). We know the profile for all team-members (actually for everybody). This way we can calculate the budget without needing to get private salary information.

  • I like it. You can extend this to be as course or fine-grained as required by your organization while not having to give out exact dollar amounts – Dan McGrath Apr 8 '11 at 11:03
2

For many internal projects, the budget for labor is not known and, therefore, the PM cannot be accountable for project costs. In that case, you are managing schedule and scope only. If the organization chooses to monitor the cost of a given project, the organization must supply a rate for all of the labor categories used for the project. This rate would not only include the actual hourly rate for an employee's salary, but will also include various types of overhead, i.e, a fully burdened rate. For example, if the employee's labor category is senior business analyst, the rate for all senior business analysts might be $120 an hour. However, the employees' actual hourly rate is something much less than that and can range from $25 to $80 an hour as an example. The burden rate is a truer project cost than the employee's hourly rate.

Therefore, it is not a requirement and likely not very appropriate to know internal employees' salaries and wages. Obviously, if you know someone's labor category and you roughly guess where they are, but there is a lot of variation in salaries in a given labor category and, if this information becomes public, opens the door to disgruntled employees, low morale, in-fighting, etc.

If you are told to monitor the project's budget, then the organization OWES you labor category rates.

2

Staff salaries, being one of the main reasons people are working for you in the first place (if we're honest about it), are an important factor in understanding motivation - especially when a person is not performing well. Many projects fail or suffer difficulties due to the actions of people on the team so it's vital in my opinion for managers to know the full story. Certainly based on my own experiences of hiring and managing a team of people I'd say this is true.

Way back in the 1970's Robert Townsend (turned around Avis Car Rental) said that to 'outsource' what was then called "personnel" aspects (now called human resources) of management to someone else was a dereliction of the managers true responsibilities. He devotes a section of his renowned book "Up The Organisation" to it see his book here...

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No. Almost all organisations have rates for employees. The PM needs to know the rates for each team member, not the actual salary. At most this might give the PM an indication on how much a person earns (by comparing with its own salary and rate) but not an exact figure.

Using a rate for employees its not related to having or not a transparency policy, it's just an easier way to figure out costs. Costs per employees are not only dependant on salaries but should also include hidden costs like logistics costs or organizational costs.

2

This is very dangerous knowledge for a PM to have. Most organizations either don't count the cost of internal employees or they use a 'standard rate'. Similarly when an organization hires a consulting firm they know what the hourly rate is but it's not usually divided out into the individual salaries.

  • why is it dangerous? Can you elaborate? – jmort253 Apr 11 '11 at 3:33
  • If you had the choice between two team members and you knew one of them was cheaper, would you choose the more expensive person? And, usually pay rates are confidential. The more people with access, the more likely people are going to find out what their peers make. – Perry Wilson Apr 11 '11 at 16:52
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In large institution, like European Commission, every job or position stands for a specific value that is used in the budget management. In that way it's quite easy to do this and only a matter of multiplying the days they will work with the value they have.

In private companies, same can be done if the salary is private, by giving a certain value to a job or experience the workforce has.

Good thing could be to let your boss (or those who do know the salary) confirm the estimated values before using them in your planning or budget allocation.

It's not really matter of what the PM thinks. If the company's philosophy is to hide salary, then they'll hide it...

0

Under the assumption that you work with emotionally intelligent individuals, I actually think that transparent salaries is a good practice.

Pay secrecy leads to decreased performance, whereas pay transparency increases performance as explained here.

More on transparent salaries on this Ted talk.

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