Forecasting payroll costs for the Department of Social Security (UK)

The Department of Social Security awards pay increases to all staff on the basis of annual performance markings. These are translated into cash amounts according to complex progression rules, which specify the increment that an employee receives depending on his or her position on the salary scale. The aim of this paper is to discuss how a forecasting model based on regression analysis has been developed for the Department of Social Security in the United Kingdom in order to complement their existing payroll modelling system. The new forecasting model was tested and found to be robust to changes in the forecast complements, the spine flow propensities, and the initial average salaries, all of which were used as inputs to the Department's payroll modelling system.