How to make the HR budget/importance/Steps to follow

With the beginning of a new year, the HR sector needs to be prepared for new people management challenges . Therefore, with good budget planning, it is possible to reduce costs and have a more strategic view of the sector, facilitating decision-making. But do you, as a professional in the area, know how to make an HR Budget ?

If your answer is “no”, understand that knowing how to prepare this budget is essential for competent management, directly impacting business results, making the company achieve its goals.

Furthermore, with the COVID-19 pandemic, this type of document has become even more important, as the “new normal” in society also started to dictate new processes and habits in companies.

Thinking of helping you in this matter, we prepared this post, with the main tips on how to make a good HR budget preparing the sector for the new year that is beginning.

Why is it important to make an HR Budget?

The budgeting of the HR sector becomes even more important in times of economic crisis, like what most companies are experiencing in the face of the new coronavirus crisis.

Therefore, the good HR professional needs to be aware of issues related to legislation, as well as actions and people management strategies that make the business more competitive. Something that is only possible by providing a good experience to employees in the work environment, in addition to optimizing processes, thus resulting in cost savings for the organization.

But it is up to HR to emphasize that it is the people who will make the company overcome the challenges and recover growth. In addition, you also need to remind them of the certainty that this scenario will not last forever. Every crisis has a beginning, a middle and an end. And it is at this time that the HR professional must assume their role in people management, starting with a lean and efficient budget.

However, we know that this is not always an easy task, since the sector has several fixed and variable costs, such as overtime, promotions, commissions, admissions and dismissals, among others.

How to make the HR budget in practice?

Follow 6 practical actions that will help in the preparation of the HR Budget!

1. Define goals and costs

The first step in making the HR Budget is to know the company’s goals for this new year and align them with the demands of the sector. Among the questions that the human resources professional should ask the organization’s managers and leaders are:

  • What growth target does the company want to achieve in 2021?
  • Which sector should receive the most investments?
  • How many employees will need to be hired?
  • Will there be layoffs, promotions or reassignments?

With the answers to these questions in hand, HR will be able to make its spreadsheet and, thus, will have a clearer view of expenses with admissions and hiring. These questions will also give a more precise idea of ​​the expenses with payroll and investments in qualification employees, such as training.

2. Document the planning on paper

It may seem like a rather obvious tip, but be aware that there are still organizations that do not formalize the HR Budget. Thus, ideas and strategies are stored only in the minds of professionals in the sector, making it more difficult for HR to demonstrate professionalism, not convincing managers and leaders of the importance of this alignment.

Therefore, it is essential that HR formalize the budget in a document where everyone can refer to it when necessary. It is noteworthy that it should already be ready at the beginning of the year, so that the company can plan and separate the funds for investment in the sector. Therefore, the ideal is for the document to be finalized in the last quarter of the year.

3. Use solid data

Technology in the HR sector can help a lot in budgeting , especially in times of crisis. Through HR software, it is possible to use data intelligence in favor of the company and optimize the changes that this moment requires.

In this sense, one of the crucial data is the behavioral profile. It is through it that managers are able to better understand the impacts that a crisis can have on their employees.

By understanding and correctly reading this information, it becomes possible to create resources to encourage and motivate employees, regardless of the reality experienced by the company. In addition, it is possible to design predictive actions to keep people engaged and productive.

Among the main data and indicators that an HR software can provide to assist in the preparation of the HR Budget and decision-making are:

  • turnover index ;
  • Number of people per sector ( Headcount );
  • Talent Retention Index;
  • Average time in the Company;
  • Absenteeism index;
  • Productivity;
  • Return on Investment (ROI);
  • Payroll expenses.

4. Design cost reduction strategies

This is a key part of a good HR Budget. This is because cost reduction will always draw the attention of managers and leaders, as it brings savings and good results for the business.

Therefore, the time to prepare the budget is the ideal time to reflect on HR attitudes that can provide savings in some company processes , leaving more resources for investments in areas that need improvement.

The investment in technologies in the sector, as mentioned in the previous topic, provides very relevant results. Also, there are many other strategies that can help with a leaner HR Budget.

A good tip, for example, is replacing overtime pay with an hour bank. Thus, they can be compensated with additional slack, reducing financial costs for the organization.

Furthermore, with home office work becoming one of the main trends in companies due to social isolation and being fundamental for the prevention against the coronavirus, why not adopt it after the pandemic?

The home office brings a lot of cost savings to the company, as it spends on employee transportation, for example. In addition, the company will have savings on space, energy, internet rent, among many other benefits. Furthermore, it will project an image of an organization that cares about the safety and well-being of its professionals.

Another important factor to consider in the HR Budget is recruitment and selection . Through the People Analytics methodology , it is possible to have more engaged employees with high performance. Investing in this management method reduces future expenses related to low productivity and high turnover by helping HR put the right person in the right place.

5. Identify strategies and actions that did not work in 2020

It is extremely important that the HR professional reflect and evaluate the actions of the sector that were important in the previous year and which did not add growth to the organization. To help with this task, try to analyze the indicators and goals, identify what the area was able to put into practice and what was not possible.

With this data in hand and correctly analyzed, you can prepare actions and strategies for 2021, avoiding mistakes that were made in the previous year. Furthermore, it is possible to improve processes and strategies that are working and adapt them to the new year.

6. Talk to company managers and leaders

Another important tip is to have clear and participative communication with managers and leaders. Thus, it is possible to identify and understand the main demands of each one.

Afterwards, analyze in which of these points HR can intervene to help each sector, such as issues related to qualification training or working on actions according to the behavioral profile of employees, among other people management strategies.

Good HR professionals need to be aware that, when preparing the sector budget, they also need to involve the organization’s team and leaders , as this is a way to align interests and seek solutions to business challenges in a more assertive way.

Of course, even if HR is responsible for the budget, it is essential that other managers feel part of its construction and recognize, in this document, the importance of their role in achieving their goals.

put your hands dirty

These were some tips to help, when it comes to understanding how to make an HR Budget in the best way possible. Even knowing that this activity can seem challenging and complex, the preparation of the document is a key part for the sector to be recognized as one of the protagonists in the success of the business, as it is always in search of better results through people management.

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