Creating a budget for your HR department seems simple enough, but if you’ve ever had to do it, you know what I mean when I say that it’s harder than it sounds. There are so many considerations that go into planning your budget, and often the further you get into the planning, the more confusing it becomes. When you begin thinking about all of your department’s needs, any foreseeable needs for the coming year, budget constraints, and what you would like to do versus what you can afford to do, it can leave your head spinning. However, it really doesn’t have to be that cumbersome.

Future Planning

One of the major frustrations I’ve seen when HR executives set out to budget is that they haven’t planned strategically for the next year, so they attempt to do so while they are budgeting. Even worse is when they don’t discover until well into the year that something they needed isn’t in the budget because future planning wasn’t thoroughly considered. To start off on the right track, you need to put pen to paper and get all those genius ideas out of your head and where you can see them. It’s amazing how much time it will save to do this, both in budgeting and in annual planning. When you have a list right in front of you, you can begin assigning approximate values and thinking about what is realistic. You can then add or remove from there, based on how much room you have in your budget. In this initial stage, think “ballpark” figures rather than researching specific amounts, because that will come later.

The Essentials

Aside from your strategic planning, there are some other things that every HR department should consider at budget time. It can be easy to overlook them when they are used day in and day out, so here’s a shortlist of items to be sure to consider:

  • Agency fees for temporary employment and recruiting firms;
  • Advertising, job postings, and career fair expenses (don’t forget to budget for giveaway items, brochures, booth space, etc.);
  • Learning and development, both internally and externally, for each department as well as the general employee population;
  • Total compensation packages, including benefits;
  • Technology maintenance or upgrades;
  • Talent acquisition costs, such as pre-screening/testing fees, referral bonuses for employees, travel reimbursement for potential candidates, relocation costs, background checks, and more;
  • Built-in contingencies to cover emergencies and underestimating (typically 10 percent of your total budget).

The Budgeting

Begin assigning a dollar amount to each budget item, based on previous years’ expenses, research, or estimates. It can be difficult to determine the costs of something that wasn’t previously on your budget, but many companies are willing to discuss the approximate costs of their services, so don’t hesitate to reach out to them, even if you’re not ready to begin the project right away. It’s also helpful to have a general idea of which items are priorities since it’s possible that you may get to the end of your budget and realize that there’s just no way to do it all. Additionally, it could get sent back to you with a request for reductions as part of the approval process.

Don’t be discouraged, but instead be ready to adjust as the need arises. In a perfect world, your budget would be approved without question, but realistically speaking, you may be asked to make cuts. Keep in mind that this isn’t typically a challenge to your professional expertise, but is a normal part of the process. If the money were coming from your personal budget, you’d want to know that the expense was thoroughly considered. If you are requested to make cuts, rise to the occasion and use it as an opportunity to show your leadership skills and expertise.

How do you handle making adjustments to your budget when it’s not quite realistic? Let us know in the comments section below.

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Jessica Miller-Merrell

Jessica Miller-Merrell, SPHR, is an author, speaker, Human Resources professional, and workplace social media expert who has a passion for recruiting, training, and all things social media. She is the president and CEO of Xceptional HR, and a leader in the HR community with more than 12 years of industry experience. The author of Tweet This! Twitter for Business, Jessica was named by HR Examiner as the second most influential recruiter on the Internet and the seventh most powerful woman on Twitter. She is a columnist for both SmartBrief and The Huffington Post, in addition to Blogging4Jobs and Human Resources One on One. Jessica has been interviewed for professional articles in CIO Magazine, Entrepreneur Magazine, SHRM’s HR Magazine, and on CBS. Jessica earned a Senior Professional in Human Resources designation in 2008, and holds a bachelor’s degree in Anthropology and Business from Kansas State University. Originally from a small town in Kansas, Jessica currently lives near Oklahoma City with her husband, Greg and daughter, Ryleigh.

2 Comments

  • Avatar Sarah James says:

    Planning and creating a budget is always a challenge. Not only you might forget to include certain things, some unpredictable issues might arise. In order to avoid this, it’s good to start planning in advance and share the budget plan with your colleagues – they might point things you haven’t previously considered.

  • Avatar Peter Nade says:

    It happens very often that the adjustments to the budget need to be made. There should always be major priorities for the money allocation in the budget plan, so that if the budget is cut it would be easier to eliminate things that are not absolutely necessary, like leaflets might have simpler design, seminars might be organized only in bigger cities, etc.

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