Find out what you need to factor in to have enough funding
If, during the course of the year, you discover some HR expenses were underestimated or omitted from the budget, the department may be able to trim or delay costs in other areas to make up for the difference.
Technology upgrades, for instance, that aren’t immediately necessary to continue operations — such as migrating an HR system to the cloud, which more than 75 percent of organizations plan to do in the next two years, according to an ISG report — can often be moved to a less aggressive schedule.
However, finding a financial shortage in areas human resource teams are expected to deliver noticeable, somewhat immediate results — such as retaining top talent, which Xerox HR Services found was employers’ No. 1 compensation-related priority last year — can pose more of a problem.
The key to creating an effective budget involves accurately estimating what various processes will cost; which isn’t always as simple as it sounds.
Before you send your next HR budget for approval, make sure you’ve included enough funds to cover these frequently unanticipated expenses:
1. Education
Training is clearly a priority — or should be one — at a number of companies; developing the next generation of leaders within the organization was the top human capital challenge HR professionals said in a Society for Human Resource Management survey that they anticipate facing in the next decade.
Eighty-three percent of business and HR leaders in 140 countries ranked careers and learning as an important or very important human capital trend in a 2017 Deloitte survey. Yet a number of organizations seem to lack adequate funding for employee training and development programs. Nearly a third of the HR professionals who participated in the most recent SHRM recruiting and skills shortage survey said their company had no training budget. An additional 11 percent said their training budget had decreased in the past year.
2. External assignments
Sixty-nine percent of companies report they’re under pressure to reduce mobility program costs — yet only 51 percent track international assignments’ total expense, according to a report from Brookfield Global Relocation Services.
Knowing what international assignments actually cost is a crucial part of keeping a budget in check; HR departments that manage mobility programs need to come up with accurate estimates. Comparing the total expense to the previously estimated cost when assignments are over can help organizations gauge mobility-related expenses more precisely; however, a survey from mobility solutions provider BGRS found more than 75 percent of companies don’t. Ninety-four percent don’t measure their program’s return on investment, which could help HR professionals justify the budget allocation for international assignments, if leadership ever questions the amount.
3. Lesser-known recruiting responsibilities
Some of your organization’s HR budget has likely been earmarked for finding and communicating with candidates; however, it’s easy to inadvertently neglect to include some parts of the recruiting process in your specific spending plan.
Employer branding, for example, can be widely interpreted term. Because social media posts don’t involve a direct cost, such as an advertising fee, leadership may perceive sharing information about the company on sites like Facebook and Twitter will be a free outreach effort. However, there is a cost involved in the time it will take staff members to internally oversee the initiative. More than half (63 percent) of companies spend six hours or more a week on social media updates, according to Social Media Examiner research; 19 percent spend more than 20 hours a week.
Twenty-eight percent of HR professionals at mid-sized companies named not having a compensation negotiation budget as one of the biggest marketing challenges involved in the recruiting process in a survey on the topic. Has your department incorporated the internal resources you’ll need to research salary ranges for positions in different regions to ensure you’re making a competitive offer? If your current HR staff can’t accommodate that type of time-intensive work, have you allotted funds to hire external help?
If you find you haven’t accurately projected all of the HR costs involved in the recruiting process for the year, you may be able to reduce the overall amount you need to spend by using a nontraditional recruiting campaign to attract candidates, or strengthening the way you use technology in recruitment and selection.
To cut HR costs in the future, implementing passive recruiting techniques — including promoting your employer brand through unconventional social media outlets — and instituting programs to encourage employee referrals may help you shrink the amount you need to spend on recruiting. That approach may also help you see enhanced results: More than three-fourths of recruiters, according to Jobvite research, say referrals provide the best quality candidates.