Human Resources (HR) Budget

The human resources budget refers to the funds that HR allocates to all HR processes enterprise-wide. The HR budget will include funds allocated to hiring, salaries, benefits, talent management, training, succession planning, workforce engagement, and employee wellness planning.

HR budgets use financial information, performance results and historical data from every department. Since the HR budget considers HR activities company-wide, it is an incredibly complex yet essential document to determining a company’s future HR activities. 

• Complex forecasting on number of employees
• Employee turnover rates
• Salary data
• Recruitment budget
• New benefits programs
• Training and development
• Payroll costs
• Overtime
• Incentive compensation
• Strategic planning (data/consultants)
• HR databases
• Intranet design and maintenance

HR budgeting is important because:

• it prevents over hiring. 
• it helps organizations understand their staffing needs.
• it prevents understaffing. 
• it aids in attracting top talent.  
• it helps create a plan for satisfying talent and, thus, reduces turnover.

There’s no single way to prepare an HR budget. HR budgets are highly unique to a company’s strategic direction. That said, most HR budgets will involve the following steps:

1. Review historical financial performance: To budget for the future, you’ll have to review past budgets and the strategic plan. You can then establish goals and identify capital expenditures based on historical performance. 
2. Choose a budgeting strategy: You’ll have to choose the best budgeting strategy for your organization. Typically, organizations choose to create incremental budgets or zero-based budgets. 
3. Analyze real-time performance data: Before you can create your budget, you’ll have to perform an analysis of HR performance data and budget actuals as they are in real-time. This analysis should include revenue, both departmental and organizational expenses, staffing (recruiting, hiring, turn-over), and employee compensation. 
4. Get a comprehensive view of how finance impacts operations: A single source of performance data will aid your analysis. When you can easily see a 360* view of all financial and non-financial information, you can:
   - Set more realistic budget caps.
   - Understand where you can build flexibility into your budget.
   - Monitor your budget’s performance in real-time.