Human resources are the driving force of any business. When handled well, HR can drastically move a business forward. When mishandled, it can cost a business big time—and negatively affect the bottom line.
To execute a successful HR plan, it is necessary to invest in people at every stage—from first contact to talent retention. You must correctly plan the strategy of hiring new employees, always be aware of the needs of existing staff, and provide the best conditions for each team member.
In this article, we have compiled a list of items that you must consider when planning your HR budget.
Your employees are the heart of your organization. As your company grows, you need to continue to attract and hire top talent that can help take your business to the next level. Whether you’re hiring for a few roles or looking to grow rapidly, your recruiting needs and budget will change depending on how many open roles you need to fill. You need to decide if you want to keep all hiring in-house or use an agency; how much you’re looking to invest in employer branding and different recruiting channels; and the software your team needs to do their jobs effectively.
Here are some things to consider:
In-House HR vs. Agency
Depending on your business needs, you might want to use existing internal recruiters, grow your recruiting team to keep up with increased demand, or turn to a staffing agency to help you source candidates. To hire a new internal recruiter, you must budget for their annual salary, benefits costs, relocation fees, signing bonuses, etc. If you choose to use an agency, you will need to get a price quote for their services and commission fees, which can vary depending on the type of open positions you need to fill and how many employees you need to hire. For example, finding and vetting a potential CEO candidate can be quite expensive, while finding a marketing associate will be less costly.
Depending on what job posting sites you want to use or if you want to pay to promote your job postings, you will need to add that to your budget. Additionally, you might want to invest in services like LinkedIn Recruiter to help your internal team source and connect with top candidates.
From onboarding to offboarding, HR software can streamline the entire employee lifecycle. Investing in the right technology can help streamline your team’s efforts, freeing up more time for you and your coworkers to plan strategic initiatives that drive business results. Here are some examples of technology and services your department might want to invest in:
- Human Resources Information System (HRIS)
- Applicant Tracking Software
- Employee Engagement Software
- Payroll Processing Provider
- Learning Solutions
- Employee Feedback
- Health and Wellness
- Benefits Administration
- Enterprise Resource Planning
- Travel Management
- Compliance Management
Often the most expensive item on a company’s bottom line is employee salaries. When budgeting for employee compensation, here are things to consider:
Define Headcount Needs
Evaluate your team’s headcount needs. Do you plan on growing this year? If so, consider what roles you will need to hire and look into salary benchmarking to get a feel for a position’s market rate. You might also want to consider if you want to hire a full-time, in-office employee or remote candidate or if you just need a temp for the duration of a project. Whatever your needs are, be sure you account for these additional salaries when you’re building out your team’s budget.
Raises and Bonuses
Investing in your current talent is just as important as investing in new talent, so don’t forget to budget for your existing employees. Add funds into your annual budget for bonuses, merit raises, promotions, professional development stipends, etc. so you can show your employees you are invested in their success and appreciate their hard work.
If any positions involve business travel, then this automatically means additional costs. Additionally, if you plan to bring remote employees to the office quarterly or annually or host a company/team retreat, you will need to pay for employee travel, food, and lodging.
Benefits and Perks
Keep in mind various additional benefits your company offers, like healthcare, vision, and dental coverage, as well as perks like office snacks, fitness classes, subsidized transportation costs, on-site childcare, etc. Benefits and perks are a huge opportunity to make your employees more loyal and productive at work.
Training and Development
To help your employees grow personally and professionally, you need to invest in their skills. Whether it’s letting them attend a class, go to a conference, or buy a book providing an annual learning stipend is a great way to retain your employees and encourage them to develop skills relevant to their role at your company.
Setting Up an L&D Program
The cost of training employees depends on how you approach it. For example, if you launch an internal-lead lunch-and-learn program, the only expense is your internal speakers’ time and effort. But if you train your employees with the help of virtual reality or have a subject matter expert come train employees, you’re looking at a larger investment. Many companies choose to give employees a set annual stipend—say $1,000—to spend however they see fit to develop skills pertaining to their role.
Events are another way to develop a corporate culture and improve employee morale. Whether you’re planning a company holiday, team off-site, routine happy hour, department dinner, or catered office lunch, be sure to pad your budget to account for small surprises along the way to reward your employees’ hard work and give them an opportunity to kick their feet up and relax.
There’s a lot that goes into forming an HR department’s budget, but a great place to start is reviewing past budgets and seeing what areas you need to increase or decrease spending. From there, you can tweak numbers and give yourself some flexibility to ensure your team has the funds it needs to have a successful year.
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