HR Budget

HR Budget

HR Budget

Every organizational function and activity needs money to run smoothly. Availability of adequate financial allocation is needed for development and improvement purposes. This is also true of HR. Continuous development and improvement in HR is as important as those in the business activities of your organization.

Managing a human resources department involves budget planning and execution, just like any other company department. Steps to creating an HR budget include preparing a forecast, developing your personnel, analyzing jobs, and preparing a short and long-term plan to execute your vision. By accurately assessing what work needs to be done and who can do it most efficiently, managers can ensure an organization’s success.

Your Human Resource budget must cover all important expenses, whether present or future, and even for seemingly insignificant items. Funds for HR contingencies are also required. Adequate funding is vital to make HR as a strategic partner. HR Budgeting is a powerful financial tool that can estimate the expenditures made by the HR department. This strengthens and allows the HR to control the cost rather than letting the cost control the HR initiative. The budget is drawn parallel to the goals of the organization.

HR budgeting is subject to many factors including corporate policies. The budgeting format may change accordingly. You may need to make provisions for other items of HR costs that may arise from time to time. If you consider any of these important enough in contributing toward improving people’s efficiency and organizational effectiveness, include it in the budget.

Prepare your HR budget only after you have clearly understood the business of your organization and its overall corporate plan. An HR department should have to align HR budget with strategic organizational goals within organizational guidelines and procedures.

HR Budget in Short:

In short, HR budgeting involves the systematic collection of companywide HR related information and data so that the finances needed to support an organization’s objectives can be projected. New organizations have no prior budget to use for comparison; therefore, projecting and estimating will be needed for the initial HR budget.

Methods for HR Budgeting:

 Incremental budgeting - using the current budget, a new budget is developed by making adjustments upwards or downwards to each item based upon expectations.

Zero-based budgeting - every item included in the budget must be justified before being included; therefore, the process begins with a clean slate.

Budgeting requires the collection of many forms of data. From a human resource perspective, the data needed to create a new budget include the following:

      • Number of employees projected for next year.
      • Benefits cost increases or projections.
      • Projected turnover rate.
      • Actual costs incurred in the current year.
      • New benefits/programs planned.
      • Other changes in policy, business strategy, law or regulation that may impact costs.

While there are many items that may or may not be included in an HR department’s budget, below is a list of some of the most common ones to consider.

Selection and Placement

Recruitment advertising, Agency fees, Temporary help, Employee referral program, Skills testing, Drug testing, Background checks, Recruitment-related travel, College recruitment giveaways, Printing costs-applications, recruiting brochures, Web development / maintenance, Applicant tracking system costs etc.

Training and Development

External programs, Registration fees, Travel expenses, Certification exam costs, internal programs, Consulting fees/trainers salary, Program materials, Food and beverages supplies for attendees, Audiovisual rentals etc.

Compensation and Benefits

Employee salaries, Payroll costs, Overtime, Incentive compensation, Group Medical Claim Policy, Group Personal Accident Policy, Pension, Provident fund, Gratuity, Employees state insurance, Cafeteria plan administration, Telecommuting expenses, Survey reports etc.

Employee and Labor Relations

Recognition program, Service awards, Attitude survey administration, Performance appraisal software, Attendance incentives, Employment &labour law advisory fees, Outplacement expenses, Suggestion program awards, Labor relations expenses (consultants), Diversity management program administration etc.

Health, Safety and Security

Employee assistance program, Smoking cessation, Fitness facilities, Safety training / promotion, Workplace violence prevention / training, Revenues etc.

Other

Strategic planning (data/consultants), charitable donations, HRIS administration, Intranet design and maintenance, HR databases/subscriptions/memberships/books etc.