How To Create An HR Budget?

How To Create An HR Budget?
  1. What is HR budgeting?
  2. How to create an effective HR budget? Our Advices for Planning Good HR Budget
  3. Why should you plan your HR budget?
  4. Summary

Financial planning is important for any business. In order to avoid a complex financial imbalance, companies must calculate income and expenses in great detail.

Of course, the HR budget is no different. After all, the list of its expenses includes not only the salaries for personnel specialists and expenses for team building.

Especially in big companies, HR budgets have a lot of mandatory expenses and investments. This is why it needs to be planned in advance to avoid unforeseen costs.

Automated HR systems also make it possible to better calculate and plan the HR budget. Check it out and try it right now. Sign up and get free access to the Brainy HR demo version for 1 month.​

What is HR budgeting?

The human resources budget refers to the funds that HR allocates to all HR processes enterprise-wide. The HR budget will include funds allocated to hiring, salaries, benefits, talent management, training, succession planning, workforce engagement, and employee wellness planning.

In the table below, we have shown the main components included in the HR budget.

How to create an effective HR budget? Our Advices for Planning Good HR Budget

The creation of an HR budget requires the cooperation of the HR director and the financial director.

After all, it is in such a partnership that it will be possible to create a correct and effective budget for the management of personnel finances.

Expense management is not only about the small expenses of employees. Cost management in the company is a process of planning, organizing, controlling, and evaluating funds spent on operational and strategic activities.

Expense reports are the most important metric every company uses to track its employees' expenses.

Cost management has always been a challenge for HR departments.

Creating an HR budget may seem simple at first glance, but creating and sticking to it becomes more difficult as your workforce grows and your business scales.

That`s why in order to correctly calculate all personnel costs, you need to implement effective HR software that will make even difficult forecasting budgeting much easier.

HR budgeting helps HR departments prepare for the future and effectively manage their resources for productive work.

Pay attention to our advices for the correct preparation of the HR budgeting.

  • Stay on Top of Your Actual Workforce Needs

Identify urgent and priority staffing needs. Only if you have deep knowledge and visibility of all business processes will you be able to allocate your budget between teams and roles properly. Therefore, you need to communicate with department heads to set priorities. This will ensure that you take into account everyone's needs, and it will help you create a more reliable budget.

  • Formulate your main business goals

You cannot achieve your business goals without people. That`s why, to achieve certain results, you need to assess and analyze where your organization is going. Are you in stability or growth mode? Are you looking to develop a new product or are you focused on improving existing products? The answers to these questions and your focus of action will depend on how many people you need to achieve your goals and how much budget you will need to allocate for it.

  • Create a plan for each scenario

As in other areas of financial planning, modeling various scenarios can help you predict any situation.

Scenario modeling allows you to consider several future scenarios and be prepared for them in case of potential market changes. You'll also be able to compare and contrast possible budget solutions to see what makes the most sense for your organization. While there are always many scenarios to plan for, focus on those that pose the greatest risk when evaluating their impact on your plan. With these comparisons, you can get the information you need to make the right decisions in the future.

  • Integrate Your Data

Integrating your data in one place will allow you to better plan salaries, benefits, and taxes, helping you stay within budget and create an effective business strategy. Storing personnel data also allows you to see more deeply the processes taking place in your business and create effective work and personnel solutions. High-quality HR software will help you in this, becoming a reliable assistant in managing HR processes. Sign up now and get 1 month of free access to the Brainy HR demo version.

  • Use technological solutions in your business

A properly chosen technological solution can significantly improve business results and process management quality. Also within the framework of HR - budgeting, the right digital solution will allow you to get information for a better alignment of the personnel budget agreed with your business goals. With the right tools, you can plan salaries and benefits more efficiently, optimize your spending, and ensure you have enough funds for your future education and employment needs.

Why should you plan your HR budget?

HR budget planning is just as necessary as other departments' costs.

A correctly calculated HR budget is the basis of general business budgeting. After all, if the company's managers ignore drawing up the HR budget, HR expenses may unexpectedly appear at the end of the month, which will be an unpleasant surprise for the company's financial department.

The main reasons for forming and planning an HR budget:

  • A well-planned personnel budget allows you to redistribute resources when things change or unforeseen situations arise
  • A well-formed budget is key to ensuring the effectiveness of the HR department.
  • Achieving organizational success. By effectively managing HR costs, organizations can get the best out of their staff, be productive and achieve their goals.

When drawing up a personnel budget, you need to take into account both current needs and needs for the coming year. Adjustments and checks can help make sure everything is going according to plan.


Creating a budget to cover the costs of hiring, training, salaries, benefits, and more is in your company's interest. This helps prevent any surprises that could rob you of your ability to work productively and grow.

The best assistant in creating well-planned HR budgets is HR software. Sign up now and get a 1-month free access demo version of Brainy HR.​


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