Take time to think thoroughly and to prepare a good and facilitative HR budget that addresses every important HR matter.
Every organizational function and activity need money to run and manage properly. Availability of adequate financial allocation is needed for development and improvement purposes.
This is also true of HR. Continuous development of and improvement in HR is as important as those in the business activities of your organization.
Your Human Resource budget must cover every important head of expenses, whether present or future, and even for seemingly insignificant items. Funds for HR contingencies are also required. Adequate funding is vital in order to make HR as a strategic partner.
If you do not prepare a budget you will not know how much HR is costing the organization, whether for the month, year or per each employee. You will have no indication on the return on your HR investments. (ROI)
Effective HR planning can help in the preparation of a good HR budget. With the figures written down clearly, you will know whether you can carry out the planned HR activities or not, and whether you can implement them immediately, fairly soon, in the short term or after five years, or not at all.
What HR Budget Must Provide For
You may notice that the money put aside to maintain or improve the HR function is connected to the activities of the organization.
For example, when the organization plans to venture into new areas of business activities or to increase its presence in a certain sector of the economy, it needs additional manpower. HR is required to support these plans.
If the organization wants to improve every employee's engagement and motivation, it may decide to give bigger bonus and or salary increases or better benefits. When it sees that performance is falling short of the specified targets, it send employees for training. If the organization wishes to retain employees, it gives better benefits and incentives.
The organization may have planned to increase production for the coming year or to improve the standard of service. It may need new technology. It may have intention to strengthen its marketing capabilities.
In each one of these cases, HR plays an important role. In order to carry out this role effectively, HR must have its own plans and this requires adequate financial allocation. Thus, the need to ask for allocation by way of budgeting.
Provision for Every Important HR Element
HR budgeting is subject to many factors including corporate policies. The budgeting format may change accordingly.
You may need to make provisions for other items of HR costs that may arise from time to time. If you consider any of these important enough in contributing toward improving people's efficiency and organizational effectiveness, include it in the budget.
Prepare your HR budget only after you have clearly understood the business of your organization and its overall corporate plan.