HR budget: How to plan personnel costs?

May 17, 2021

Featured-Image_Blog_HR budget: How to plan personnel costs?_EN

In any organization, financial planning, cost forecasting and the allocation of items on a tight budget are essential. Both for the achievement of company objectives and for its financial “health”. In companies with a high density of human capital, having an adequate HR budget usually makes the job of the HR Director much easier. 

HR management can provide the finance department with valuable information obtained from HR management software such as the Talentia HR Suite. This can help those responsible for setting budgets to have much richer and in-depth information about what is happening in the HR department, what the needs are and above all– what their contribution is to the achievement of strategic milestones. The HR Director must be an active collaborator with the CFO in order to underpin an HR budget that is lean, efficient, in line with the needs of the department and sufficient to grow the organization. 

Key information for HR budgeting

Thanks to the use of HR management software, we can transfer data to the finance department that might otherwise not be taken into account. Or could be under-analyzed as a potential key. Much of this information is taken into account when developing an HR budget. According to The HR Digest, in the traditional way and among other aspects, the following are usually considered: 

  • Total estimated number of employees 
  • Employee turnover rates and salary data 
  • Hiring budget 
  • Payroll costs 
  • Incentive costs 

However, additional information can be extracted from HR management to make a real contribution to strategic planning. Especially in those aspects that have to do with monitoring employee performance, designing long-term strategies, training, talent acquisition and management, or making decisions based on real-time data. 

An effective HRIS can be the ideal tool to transform the HR Director into the “best ally” of the finance department. Thanks to the Talentia HR Suite it is possible, for example, to show the benefits of an automated and intelligent talent selection, onboarding and career development process. These dynamics are crucial to keep costs under controlThe Gallup consulting firm states that the cost of replacing an employee “from scratch” can reach 50% of an annual salary and in some cases this expense can increase up to four times. 

In addition to focusing work strategies on the achievement of objectives thanks above all to the performance evaluation modules of our HR Suite– the human resources management software allows, in general terms, to highlight with tangible variables the importance of the HR department in the organization’s life cycle. This provides it with arguments for requesting a generous budget allocation or, at the very least, one that is commensurate with the strategic weight of its work.