While 2020 may still seem far off (especially as you attend to what’s left of 2019’s business), chances are your organization is ramping up its strategic planning and budgeting for the year already. If you’re starting to think about your 2020 HR budget, be sure to consider these factors.
What Type Of Budget Works Best For Your Organization?
The vast majority of organizations use a process where they take last year’s budget and adjust it up or down in various areas—this is known as “incremental” budgeting. It’s not necessarily the only game in town, though, if you’re interested in starting fresh with a new process. Building a 2020 HR budget from scratch (without using last year’s numbers as a guide) is an alternative known as “zero-based budgeting.” In zero-based budgeting, you do a fresh review of actual costs (not necessarily a previously budgeted amount) and make budget projections that way.
Zero-based budgeting may not be right for every organization—but if you’re looking to put thorough scrutiny on each item to review it for cost-effectiveness, it can help you build a leaner, meaner budget.
What Are Your Human Capitals Needs?
Whether you’re building a zero-based budget or taking last year’s budget to be refined and adjusted, you need to have a comprehensive assessment of your costs and expenses. As you look to the next year, be sure you are covering the most important areas.
What compensation and benefits will you be offering to your employees? Because this is one of the largest budget items, it should be getting some of the most intense scrutiny. Are your compensation and benefits competitive in your industry? Does your organization have aggressive workforce growth goals over the next year or two? Now is the time to take a close look at your payroll, pensions, profit-sharing, and benefits (including health insurance and retirement plans).
What will your recruiting and hiring needs look like? Your budget should include job advertising, fees, web design and maintenance for your recruiting and corporate websites. It should also include resources for background checks, any pre-employment testing, and interviewing.
Will you be implementing or expanding your tech? Many organizations are turning to beefed-up tech solutions, including AI platforms to help manage data, serve as a portal for employees, and streamline internal costs and resources. These resources often come from the HR budget rather than IT, given the department’s role in administering and using the programs.
If your organization is considering a new tech provider or onboarding a new system, now is the time to start getting cost estimates for initial phases.
What will you be doing to retain your talent? This section of your budget should include any infrastructure costs like your performance appraisal system. It should also include any employee incentive or reward programs, diversity initiatives, internal communication resources, employee surveys, and labor relations resources.
What kind of training and development resources will you offer to employees? Although training and development are a major part of retention, they deserve their own consideration when it comes to budget planning. To make sure your budget accounts for growth or maintenance, anticipate what your expenses will be for outside training (like travel and fees) or in-house training (trainer or consultant fees, facilities costs).
Also be sure to evaluate what your employees’ certification or recertification needs are. If that’s something your organization typically covers, then consider how many employees are coming up for recertification and if you've accounted for projected new hires’ certification costs as well.
What are your employee health, safety, and wellness plans? Most organizations are turning to large-scale health and wellness programs to supplement benefits programs. If you already offer fitness or other wellness programs, maintenance costs should be part of your budgeting. If you’re looking to start programs for weight loss, fitness challenges, etc., then those startup costs should be included as well.
Given how closely budgets and strategy need to align, the more you do now to think closely and strategically about your 2020 HR budget, the better off you’ll be when it comes to the end-of-year crunch time.