“How many people do we need next year?” is the question that starts every budget, and in many companies it is answered by each manager adding a few names to a wish list. Below is how to calculate it instead: from workload or from business growth, then how many people you actually need to hire after turnover, and when to start. Try your numbers in the free headcount forecast calculator.
What is headcount forecasting?
Headcount forecasting is the part of workforce planning that answers two numbers: how many people a team or company will need at a future date (demand), and how many you will have if you do nothing (supply — today's people minus those who will leave). The difference is the gap you close by hiring, moving people internally, or changing how the work is done.
Plan in FTE — full-time equivalents, not in heads: two people working half-time are one FTE. This lets you compare demand and supply regardless of contracts. The overall planning process — goals, environment, gap analysis, action plan — is covered in Human Resource Planning Process. This article is about the calculation.
Plan in FTE — full-time equivalents, not in heads: two people working half-time are one FTE. This lets you compare demand and supply regardless of contracts. The overall planning process — goals, environment, gap analysis, action plan — is covered in Human Resource Planning Process. This article is about the calculation.
Method 1: forecast from workload
This is the most reliable method for roles with measurable, repeatable work: customer service, operations, back office, recruiting, support. It has three inputs:
Example: 4,800 tickets a month × 18 minutes = 1,440 hours. With 130 productive hours per FTE, the workload needs 1,440 ÷ 130 = 11.1 FTE. If volume grows by 15%, you will need 12.7 — that is, 13 people.
- Volume of work — units per month: calls, applications, orders, tickets, vacancies.
- Time per unit — average minutes one unit takes, measured, not guessed.
- Productive hours per FTE — contract hours minus vacation, holidays, sickness, training and meetings outside the measured work.
Example: 4,800 tickets a month × 18 minutes = 1,440 hours. With 130 productive hours per FTE, the workload needs 1,440 ÷ 130 = 11.1 FTE. If volume grows by 15%, you will need 12.7 — that is, 13 people.
Method 2: forecast from business growth
For roles where work is hard to count in units — product, marketing, management — start from the business plan:
Required headcount = current headcount × (1 + business growth) ÷ (1 + productivity gain).
Example: 10 people, the business plans 20% growth, and you expect 5% productivity gain from automation and better processes: 10 × 1.20 ÷ 1.05 = 11.4, so 12 people. Without the productivity line you would plan 12 hires the same way every year — and that is how companies grow headcount faster than results. The productivity question comes first: what would make the current team 5–20% more effective?
Other demand methods covered in my course include extrapolation of past trends, expert methods (Delphi, nominal group) and gap analysis.
Required headcount = current headcount × (1 + business growth) ÷ (1 + productivity gain).
Example: 10 people, the business plans 20% growth, and you expect 5% productivity gain from automation and better processes: 10 × 1.20 ÷ 1.05 = 11.4, so 12 people. Without the productivity line you would plan 12 hires the same way every year — and that is how companies grow headcount faster than results. The productivity question comes first: what would make the current team 5–20% more effective?
Other demand methods covered in my course include extrapolation of past trends, expert methods (Delphi, nominal group) and gap analysis.
How many people do you need to hire?
Required headcount is not the hiring plan. People will also leave during the period:
Example: 10 people today, 13 needed in a year, annual turnover 18%, one known retirement. Gap 3 + leavers 1.8 + known 1 = 5.8, so plan 6 hires — twice the gap. Teams that plan only the gap are always behind. For the turnover rate itself, see Employee Turnover Rate: Formula, Calculator and How to Read the Numbers.
- Expected leavers = current headcount × annual turnover rate × months in the period ÷ 12.
- Known exits — retirements, fixed-term contracts ending, planned internal moves out of the team.
Example: 10 people today, 13 needed in a year, annual turnover 18%, one known retirement. Gap 3 + leavers 1.8 + known 1 = 5.8, so plan 6 hires — twice the gap. Teams that plan only the gap are always behind. For the turnover rate itself, see Employee Turnover Rate: Formula, Calculator and How to Read the Numbers.
When to start hiring
Take your average time to fill for the role — days from opening the vacancy to the offer accepted — and add the notice period and ramp-up if the role needs time before it is fully productive. That is how far ahead of the date you need the person you have to start. For six hires in a year, open roughly one search every two months; do not open all six in January and let them compete for the same recruiter time.
Check the labour market before you commit
A headcount plan is only real if the market can supply the people. Before you sign off the plan, check how many people with the skills you need exist in your location and how many you can realistically attract.
What if the forecast shows a surplus?
Sometimes the calculation shows that the team is larger than the workload needs — after a drop in volume, automation, or years of adding people “just in case”. Do not start with layoffs. In order:
- Stop automatic replacements. Let natural turnover close part of the gap: in the calculator, a negative gap is subtracted from the replacements you would otherwise make.
- Move people internally to teams where the forecast shows a shortage.
- Redesign the work — combine functions, remove duplication, automate, use internal part-time or project work.
- Only then decide on reductions, and plan them as carefully as hiring.
Five mistakes in headcount forecasting
- Adding up managers' wish lists. Without a workload or growth logic, every team asks for a little more.
- Planning only the gap. Turnover and known exits often double the real hiring need.
- Using contract hours as productive hours. It underestimates the FTE you need.
- Ignoring productivity. Growth does not have to mean the same growth in headcount; automation, combining functions and better processes come first.
- Forgetting time to fill. A hire planned for March and started in March arrives in June.
How to analyse workload, set staffing norms, segment staff, forecast demand and optimise headcount — combining functions, removing duplication, automation, outsourcing — is what the Workforce Planning course covers in six lessons.
