How to prepare your HR budget? 5 Steps to help you

In an uncertain economic context, effectively preparing your HR budget becomes crucial for any company wishing to optimize its human resources and ensure its financial situation. In 2024, the challenges are numerous: recruitment, training, payroll management, and specific projects. Let's discover step by step how to create an accurate and realistic provisional HR budget.

HR budget management is not limited to listing human resources-related expenses and revenues. It is a strategic project that must align the company's objectives with its financial resources. In other words, a well-prepared HR budget helps support the company's growth while controlling costs.

The objectives of an HR budget

The main objective of an HR budget is to predict the costs associated with human resources for a given period, usually a year. This includes the payroll, recruitment, training, and other related expenses. A well-prepared budget helps to:

• Control costs and avoid budget overruns.
• Allocate resources optimally.
• Evaluate the effectiveness of the HR policies in place.
• Plan for future human resources needs.
  

Expense items to consider

To develop a comprehensive HR budget, it is necessary to consider several expense items:

• Payroll: It includes salaries, bonuses, benefits, and payroll taxes.
• Recruitment costs: They include job advertisements, recruitment agency fees, and training costs for new employees.
• Training expenses: In addition to the training costs, you should anticipate travel expenses, accommodation, and any potential allowances.
• Indirect costs: They encompass expenses related to welcoming new hires, office supplies, and HR management tools.
  

Key steps for developing an HR budget

Preparing an HR budget requires following several methodical steps. These steps ensure rigorous budget management and guarantee the company's financial stability.

Analyze the current situation

Before embarking on the development of your budget, it is essential to assess your current situation. This involves:

• Analyzing past expenses: what have been your main expense items, and how have they evolved?
• Evaluating ongoing projects: which HR projects are currently underway, and what are their financial impacts?
• Identifying future needs: what will your future recruitment, training, or other human resources needs be?
  

Define HR objectives

Once you have a clear view of your current situation, you need to set your HR objectives for the upcoming budgetary period. These objectives may include:

• Recruiting new talent to support the growth of the company.
• Continuous training to develop the skills of your employees.
• Optimizing payroll to better control costs.

Once your HR budget is established, it is essential to review it regularly to adjust and optimize it according to the company’s developments and projects.

Track and analyze expenses

To adjust your budget, start by continuously tracking and analyzing your expenses. Use budget management tools to:

• Track the evolution of your costs in real-time.
• Compare actual expenses to budget forecasts.
• Identify discrepancies and analyze their causes.

This approach allows for the rapid detection of budget overruns and implementing corrective measures.

Optimize costs

To optimize your HR budget, several levers can be activated:

• Automate HR processes: use digital tools to automate administrative tasks and reduce indirect costs.
• Negotiate with service providers: negotiate rates with your service providers (e.g., recruitment agencies, training organizations).
• Pool resources: share resources between different projects to optimize their use.

Review the budget

Finally, it is essential to regularly review your HR budget to adjust it according to the company’s developments and projects. This review should be conducted:

• Annually, during the preparation of the annual budget.
• Quarterly, to adjust forecasts during the year.
• Occasionally, in case of a significant change (merger, acquisition, launch of a new project).

This review ensures the relevance and reliability of your HR budget.

Essential tools for successful HR budget management

To successfully develop and monitor your HR budget, several tools can help you gain precision and efficiency.

HR management software

HR management software is a valuable ally for developing and monitoring your HR budget. They allow for data centralization, task automation, and increased accuracy. Among the useful features, you will find:

• Payroll management: to automatically calculate salaries, bonuses, and social contributions.
• Recruitment management: to track recruitment costs and optimize selection processes.
• Training management: to plan and monitor training expenses.

These software solutions help optimize budget management and improve the company's financial situation. They are essential to ensuring the accuracy and relevance of your HR budget.

Performance indicators

Defining performance indicators is also important to monitor and optimize your HR budget. These indicators measure the effectiveness of HR policies and adjust the budget accordingly. Among the most common indicators are:

• The turnover rate: to evaluate the stability of your team.
• The cost per recruitment: to measure the efficiency of your recruitment processes.
• The training rate: to track the skill progression of your employees.

These indicators enable the adjustment of your budget and optimize your budget management.

Why invest in a talent and skills management software?

Turnover is a significant factor to consider when preparing your HR budget. A stable and engaged team is loyal to your company. So, forget about replacement and recruitment costs, because they will stay with you! But you still need to know how to retain your employees... Although we provide some tips in this article, we are convinced that everything revolves around a personalized employee experience for each individual. And for that, you need to rely on internal skills and their development. If 94% of employees would stay longer in their company if it invested in their career (source: LinkedIn Learning), it's safe to say that their development is key to their fulfillment.

A talent and skills management software allows your employees to be the main actors of their careers by helping them understand the skill gaps they need to bridge to achieve their professional development goals. Employees gain valuable insights into their skills and position relative to their role's requirements.

Preparing an HR budget is a complex but essential exercise for any company wishing to optimize its human resources and ensure its financial situation. Using HR management software, budget management tools, and the rigorous monitoring of performance indicators will allow you to control and adjust your HR budget according to the company's developments.

By following these tips, you can develop a forecast HR budget that meets your company's ambitions. Rigorous and anticipatory human resource management is key to ensuring a healthy financial situation and a prosperous future. Take control of your HR budget today and prepare to face tomorrow's challenges!

FAQ

What are the consequences of a poorly prepared HR budget?

A poorly prepared HR budget can lead to:

• Budget overruns.
• Inefficient allocation of resources.
• An inability to attract or retain talent.
• A decrease in the overall performance of the company.

How often should the HR budget be reviewed?

The HR budget should be reviewed:

• Annually, when preparing the annual budget.
• Quarterly, to adjust projections during the year.
• Occasionally, in case of major changes (merger, acquisition, new project).