Developing HR budgets

Every organisational 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 of and improvement in HR is as important as those in the business activities of your organisation.

 

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, analysing 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 organisation’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 organisation.

 

If the organisation expands and requires to register a double digit growth in terms of its strength, it percolate to apportion funds in different areas including recruitment , retention, up-skilling, global mobility management, etc.

 

The allocation of funds would be governed by the HR strategies. The decision makers in an organisation remain the main players to approve the budget.

 

The recommendations and inputs are taken from different sources including operation, marketing, procurement and every other function within the organisation.

 

If you do not prepare a budget, you will not know how much HR is costing the organisation, whether for the month, year or per employee. You will have no indication on the return on your HR investments. Effective HR planning can help in the preparation of a good HR budget.

 

With the figures written down clearly, you will know whether you can carry out the planned HR activities or not, and whether you can implement them immediately, fairly soon, in the short term or after five years, or not at all.

 

In every one of these cases, HR plays an important role. To carry out this role effectively, HR must have its own plans and this requires adequate financial allocation.

 

Thus, the need to ask for allocation by way of budgeting. For example, if the organisation wants to improve every employee’s engagement and motivation, it may decide to give bigger bonus and or salary increases or better benefits.

 

When it sees that performance is falling short of the specified targets, it sends employees for training. If the organisation wishes to retain employees, it gives better benefits and incentives.

 

The organisation may have planned to increase production for the coming year or to improve the standard of service. It may need new technology. It may intend to strengthen its marketing capabilities. 

 

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 organisation and its overall corporate plan.