HR Budget Management: How to Plan a Budget for the HR Department?

HR Budget Management: How to Plan a Budget for the HR Department?
TABLE OF CONTENTS
  1. Necessary Expenses in HR Budget Planning
  2. Incremental Expenses in Planning Your HR Costs
  3. Convenient and Easy HR Budget Planning With Brainy HR Platform

December is the last call for most companies to plan their HR budget for the next year. It is difficult to define all expenses precisely in the era of the COVID-19 pandemic and a dynamically changing market situation. However, to function efficiently and achieve all the assumed goals, we should prepare a stable basis to give us a complete and detailed picture of the company's recruitment expenses. The company's budget is a list of planned revenues and expenses, thanks to which you can increase if your own company’s financial efficiency. If you are wondering how to prepare such a statement, you've come to the right place. Here are easy steps you need to take to budget your business.

Necessary Expenses in HR Budget Planning

Preparing an HR budget is not an easy task and a very responsible one. It is how it should be treated: as a tricky and accountable business.

The choice of a particular item and its weight in total personnel costs is determined by both its strategic goals and business development priorities. For example, suppose the company's most important task for the next year is to open a representative office in another city. In that case, the HR budget’s priority item will be “recruiting,” and if the release of entirely new products, then “training,” etc.

Another important function of HR management - the formation of corporate culture is at the junction of the spheres of influence of HR and PR services; therefore, when preparing the budget, you should consider the costs of all kinds of corporate events, contests, congratulations, etc.

Above, we pointed out that HR functions determine most personnel costs, but there is an exception - the wage bill (payroll). For most companies, wages are the main (both in importance and in size) item of personnel costs. Of course, depending on the company's practice, these costs can be reflected in the HR budget and other departments’ stores (for example, accounting). But in any case, the HR department takes part in the formation of the payroll, its approval, and adjustment. Calculating and justifying the costs for this item is not only the most important but also the most challenging part of preparing a budget because many aspects take into account:

1. Recruitment

- Placement of announcements in the media

- Posting vacancies on job resources (subscription)

- Payment for the services of recruiting agencies

- Testing when applying for a job

- Participation in job fairs

- Personnel reserve

2. Employee adaptation

- Supplement for mentors

- Adaptation materials (brochures, e-courses)

3. Assessment/development

- Payment for services of assessment providers

- Purchase of special diagnostic programs for employee assessment

- Motivation

4. Training

- Top managers training

- Line manager training

- Staff training

- Retraining / Qualification Courses

- Educational seminars/webinars

5. HR administration

Purchase of workbooks, cards, forms, extraordinary storage cabinets, etc.

6. Corporate events

- Birthdays

- Holidays / corporate parties

- Issue of a corporate newspaper

- Conducting competitions

- Attributes

7. Social package

- Gym / fitness rental

- Payment of health insurance (VMI)

- Payment for vouchers

- Payment of material assistance

- Compensation packages (meals, travel)

8. Business trips of the department employees

9. Salary of employees of the unit

- Constant part

- Compensation

- Prizes

10. Expenses for the maintenance of the department

- Office expenses

- Participation in special personnel conferences, exhibitions

- Subscription for unique books, etc.

Unfortunately, it is impossible to plan with 100% accuracy of labor costs: employees quit, take sick leave, go on vacation, go on business trips, etc. All these circumstances affect the accuracy of forecast calculations. According to experts' recommendations, the permissible deviation of the payroll for annual planning should not exceed 10%.

Incremental Expenses in Planning Your HR Costs

The HR budget includes many items, incl. Remuneration of employees of internal HR departments and external recruitment agencies, costs of job advertisements and their promotion, employee training, employer branding activities, maintenance and operation of the career tab on the website, etc. Most of these expenses are fixed costs that arise every year and can predict to some extent. Moreover, by looking at the budget from last year, we can assess which expenses we calculated as an increase and were unable to estimate correctly. Now that we know the company's recruitment needs better, we can avoid mistakes.

Take into account the new reality

We all observe how the labor market situation has changed under the influence of COVID-19, but do we know what the pandemic has changed in our organization’s life? The basis of budget planning should be to analyze the needs and define all departments’ current goals. Let's consider whether it makes sense to budget for participation in Job Fairs or other events that may cancel. Maybe it is better to invest more in IT support for employees working remotely or to intensify employer-branding activities in a situation when many new job seekers have appeared on the labor market.

Investigate the organization's recruitment needs

Budget planning cannot occur without talking to the company’s departments’ managers to assess their recruitment needs and business plans, e.g., creating a new call center team. We have to consider the expected number of new positions and the average turnover of staff, which we can calculate based on data from previous years. It is also crucial to properly plan the recruitment in time. Knowing in which months or weeks of the year new employees need, we should consider how much time it takes on average to search for a person for a specific position and what costs we incur during this time (internal and external). Besides, it is worth remembering that achieving the maximum potential takes a minimum of 3 months.

Verify external costs

We always plan the recruitment budget for the next year enriched with the knowledge from the previous year. It is worth checking which solutions have worked and putting more emphasis on them in the next year. If we could attract candidates using free ads in Facebook groups, maybe it is worth investing the recruiter's time in publishing ads on a social network instead of investing in paid advertising? Similarly with the services of external recruitment agencies. It is worth considering the costs and commission of external partners and then think whether t would not be more profitable in uncertain times of crisis - instead of enlarging the internal recruitment team - to use alternative solutions.

Convenient and Easy HR Budget Planning With Brainy HR Platform

To organize HR budgeting, it is crucial to define the items of personnel costs correctly. Depending on the enterprise’s specialization and the institution’s size, HR managers may have different responsibility and authority areas that add items to the expense item.

First of all, before planning the budget with BrainyHR, it is necessary to draw up a business plan for the personnel company. This document allows:

- based on the goals of the organization, to competently build a strategy for working with personnel;

- determine the budget for personnel costs and prove the need for each position in front of management;

- submit the work plan of an HR specialist to other departments of the company;

- make a forecast of the possibility of implementing the company's tasks from the point of view of the development of the human resource of the enterprise;

- set priorities in work with personnel;

- develop several options for the plan depending on different scenarios for the development of the organization;

- perform a company value assessment;

- create the required level of relations with the external social environment (relevant for city-forming enterprises).

The development of the budget in BrainyHR includes a whole range of activities:

Stage 1. Preparation.

At this stage, the collection and, if necessary, the creation of primary documents is carried out: plans for hiring employees, personnel training, social policy programs, provisions on material incentives, mentoring, salaries, staffing plan, etc. This stage can also include tenders, collection of information, clarification of the company’s cost of resources, etc. It is necessary to evaluate the work of the HR service. What method to choose to show its effectiveness

Step 2. Development of the budget form.

Usually, the document is developed in electronic form. It is desirable to divide a large paper into departments. A separate sheet is generally allocated for each month; all essential data summarized in the year’s summary sheet.

Stage 3. Protection of the budget.

At this stage, the following is determined: which specialist will control the observance and implementation of the budget; how to receive money (fill out an application for payment, etc.); when receiving what sums the specialist needs additional approval (possibly when using the services of a recruiting agency), where to send the funds unused in the past month.

Stage 4. Implementation.

Stage 5. Adjustment.

At this stage, the budget is subject to adjustments. The most frequently changed items are related to staff training and recruitment costs.

Conclusion

If the company is continually changing, the budget for personnel costs not for a year, but 3-6 months. It will allow you to predict material costs and avoid mistakes more accurately. In this case, it will take more time to prepare the document and its approval, but you do not have to contact the director to allocate additional funds continually.

Making a budget is only half the battle. We have budget protection ahead of us, and it requires preparation. The main rule here: even if you have reliable assistants or the budget is collected by the financial service, be sure to check all the numbers presented yourself. It's impossible to protect an account if you don't own the information.

Therefore, we recommend that you take with you all the materials that were used during the budgeting. It can be statistical data from past periods, a training plan, a resource plan for the next year, and data on provider companies’ prices and forecast the increase prices for services. Be sure to take all preliminary calculations with you because you may be asked to disclose the content of this or that expense, and your frantic attempts to remember the original numbers will not add points to you.

Rate this article
(4 ratings, average: 5 out of 5)