On June 28, 2017 Real Solutions Pvt. Ltd hosted 62nd HR Kurakani, at Real Solution's office, Minbhawan, New Baneshwor focused on the topic " HR Budget –How to make it effectively? The event was interactive and entirely focused on the idea and opinion sharing among the HR professional from different industries. Ms. Nibha Shakya, HR Manager at Real Solutions moderate the session.
HR budget is a thoughtful plan, part of annual budgeting in line with the current and future strategies of the organization. HR contributes enormously to a company's overall performance. In order to carry out this role effectively, HR must have its own plan and this requires adequate financial allocation.
The participants believed that, not all HR budget are the same, what falls under the HR budget depends on company’s culture and set of rules. The HR budget includes but isn't limited to:
- Talent Pool development
- Recruitment Budget
- Performance Reward
- Advertisement Cost
- Employee and Labour Relations
- Health, Safety and Security
- Expenses for Expert Hiring
HR budget not only improves the efficiency of its department but also improvise the functioning of other department and be cost effective too. If the department have clear cut budget to work on, under the planned heading it helps in quick decisions. It is a powerful financial tool for preparing analytical data of the organization. The industry driven budgeting program also helps in company valuation and audit at the end of fiscal year.
However, when HR budget is composed, the recommendations, requirements and inputs from different sources including operation, marketing, logistics and every other vertical within the organization must be taken into consideration.
HR professionals agrees that organization who don't prepare a separate budget for HR will not know how much HR is costing the organization and will have no information on the return of HR investment.
How to Make HR Budget Effectively?
Other than being align to the organizational goals, every HR program needs to highlight the benefit. The discussion also suggest that HR budget can also prepared with reference to last year's expenses. Developing HR budgets can be even more complicated if the company is new to creating a HR budget.
1. Draft at First:
There are so many consideration that go into planning HR budget. Even before the forecasting, it’s important to gather all the facts and do the research. To simplify the process, HR professional should list down all the major domain, estimate probable expenses and start working on it. Breaking down sections into sub sections.
2. Review it:
The budget plan should be logical, clear, concise and transparent. And here are few more things to be consider: What is the direct benefit to the company? How many people are to be recruited? What are the worst case scenario? Have you anticipated future needs? What thinking led you to this estimation?
3. Get the approval:
The decision makers in an organization remains the main players to approve the budget. The HR budget would further require the CFO's approval. Additionally the participants share’s, it could get sent back for adjustment.
4. Plan B Budget:
In the real world where no matter how well HR budget is forecasted, unexpected expenses comes up, a plan B budget is a necessity. In Nepal many HR professionals adjust this as miscellaneous and others ask for the request adjustment with justification and keep it transparent with the concerned authorities.
5. Monitoring & Settlement:
Tracking the action plan and proper resource utilization is essential for any budget system. It’s demonstrates accountability and helps to take remedial actions where needed.
It is during the settlement when actual gap between the proposed and incurred budget planning will be actually seen in figure says the HR practitioner. By determining the gap, HR professional can either identify a potential problem and fix it or capitalize on a potential opportunity they had not initially recognized. After determining the reasons for any differences, it easy to revise the next annual budget. The final report of HR budget must be presented to finance head and other authorities for settlement.
Therefore, budget in place enables HR to plan ahead, prioritize allocation of funds and gauge whether financial prediction are being met. It helps HR practitioners to make wise decisions to enhance organization operations with added clarity and efficiency throughout the calendar year.