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What is involved in developing an HR budget?




Budgeting involves the systematic collection of information and data so that the finances needed to support an organization's objectives can be projected. Most organizations have some sort of process for developing a budget.

Prior to the budgeting process, an organization should have completed some kind of strategic planning to identify annual goals and objectives. That will allow departments to concentrate their allotted budgets in supporting those objectives. 

Two common budgeting methods are:

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.
  • Salary 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
  • Branded giveaways
  • Printing costs--applications, recruiting brochures
  • Web development/maintenance
  • Applicant tracking system costs

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

Compensation and Benefits

  • Employee salaries
  • Payroll costs
  • Overtime
  • Incentive compensation
  • Medical insurance
  • Life insurance
  • Short- and long-term disability insurance
  • Administration of Pension/401(k) (match)/profit sharing
  • Cafeteria plan administration
  • Commuting or Telecommuting expenses
  • Survey reports

Employee and Labor Relations

  • Recognition and awards  programs
  • Employee satisfaction survey administration
  • Performance appraisal software
  • Employment attorney fees
  • Outplacement expenses
  • Labor relations expenses (attorneys, consultants)
  • Diversity management program administration

Health, Safety and Security

  • Employee assistance program
  • Nurse hotline
  • Smoking cessation
  • Fitness facilities
  • Safety training/promotion
  • Workplace violence prevention/training

Other

  • Consultants (or other subject matter experts)
  • Charitable donations
  • HRIS administration
  • HR databases/subscriptions/memberships/books
  • Intranet design and maintenance

A well-planned and thoughtful budget ensures that HR receives the necessary funding to support employee programs and initiatives critical to attracting and retaining a skilled workforce.

 

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