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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Getting Your HR Budget in Line

Companies / SME Jan 10, 2020 - 03:01 PM GMT

By: Sumeet_Manhas

Companies

Human resources; one of the essential parts of any business and always will be. With this in mind, it’s important to get it right. First and foremost, this starts with HR budgeting, and this is what we want to discuss today. How do you ensure that the budget meets the needs of the company and accommodates, or even encourages, growth?


Biggest HR Costs

Before doing anything else, you need to have a full understanding of your HR costs. Without this, you will have no idea how much money is being allocated to that department, and the business could suffer as a result. We believe it can be broken down into six main areas;

  • Recruitment - Advertising, drug testing, skills testing, agency fees, background checks, temporary help, etc.
  • Training/Development - Registration, certifications/exams, development courses, travel expenses, food and drinks, supplies, equipment, consulting fees, etc.
  • Benefits/Compensation - Overtime, salaries, payroll costs, insurance, incentive compensation, pension plans, survey reports, commuting expenses, etc.
  • Health and Safety - Nurse hotline, safety training, fitness facilities, lockers and security measures, employee assistance programs, etc.
  • Labor Relations - Performance appraisal software, employee satisfaction surveys, diversity management program administration, awards programs, etc.
  • Miscellaneous - Charitable donations, intranet installation, and maintenance, consultants and other experts, HR memberships and subscriptions, etc.

By carefully considering a budget, the HR team has the funding they need to ensure success in each of these six areas. Rather than having to make sacrifices, and thus affecting the whole business, they can attract high-quality talent, keep them happy, and ensure long-term employment within the organization.

Building a Budget

At this point, we can save you lots of hassle by saying that more and more small businesses are choosing to outsource things like HR and payroll to specialized outsourced service providers. Starting with the services you need, it’s possible to keep scaling up the services you receive until you think it’s financially viable to launch an internal HR team (if this is even necessary!).

With the budgeting process itself, you might be tempted to look at last year’s budget before then adjusting based on performance, expectations, and needs. For example, if last year fell short, and the HR team didn’t have the resources they needed, you could adjust it upwards. This is called incremental budgeting, and it’s one of two viable strategies.

On the other hand, you might prefer what’s called ‘zero-based budgeting.’ With this, you don’t start with historical data, you start with absolutely nothing. From here, you consider your costs in each of the categories we’ve mentioned. Using the strategic objectives of the company as a base, each expense should contribute when assessed individually. Since each expense is considered carefully in relation to the overall goals of the company, this strategy is often employed to help reduce costs.

Choosing a Strategy

Which method will you choose? This all depends on a few factors. First, how successful was your HR budgeting last year? If you were close to perfection but need a few small adjustments, it might be better to go with incremental budgeting. If you were far off-budget or big made some mistakes, you might want to break everything down, even if it takes a little longer.

Second, are you pressed for money? For those with minimal funding, zero-based budgeting may allow the company to save money because every single expense is justified. Whatever you do, be smart about it, you don’t want to be broke during the next recession.

As mentioned previously, there’s a third option too because there are some affordable online HR services ready and willing to help. With extensive experience in this field, they will know all about budgeting and how to improve your business even as it grows!

By Sumeet Manhas

© 2019 Copyright Sumeet Manhas - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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