HR budget: How to plan personnel costs?

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 thanks to HR management software. This can help those responsible for setting budgets to have much richer and more in-depth information. This information will tell what is happening in the HR department. In other words: 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. This way, they will underpin an HR budget that is lean, efficient, and in line with the needs to make the organization grow. 

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. And, when developing an HR budget, we can take into account this data. 

According to The HR Digest, in the traditional way and among other aspects, HR always considers: 

• 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.
• Decision-making (based on real-time data).

The HR Director and the CFO: best allies

An effective HRIS is an 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 control. 

The 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.