Personnel expenses

Personnel expenses encompass gross salaries, employer social contributions, incentive and profit-sharing schemes, fringe benefits and pension contribution charges. They are typically the largest cost item in service businesses and a primary focus of financial due diligence. Key analysis areas include: owner-manager remuneration benchmarking (above-market pay is a normalisation restatement), unfunded pension obligations, incentive plans in place, and latent employment law risks (tribunal claims, misclassification). Normalisation of personnel expenses — particularly owner remuneration — is one of the most value-impactful restatements in SME valuations.

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Example: due diligence on a Swiss services SME identifies that the owner-CEO receives CHF 450,000 annual remuneration against a market rate of CHF 180,000 for an equivalent role. The CHF 270,000 above-market remuneration is added back to EBITDA as a normalisation — increasing normalised EBITDA by CHF 270,000 and the acquisition value by approximately CHF 2.0 million at a 7.5x multiple.

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Hectelion normalises personnel expenses — particularly owner remuneration — as a systematic step in every SME due diligence and valuation engagement.