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HR Budgeting Items to Consider for Next Year

by Tim AustinNovember 1, 2017 8:00 AM

Whether you’re basing your budget on last year’s expenditures or planning every budget item from scratch, it’s important to review different HR needs so that you don’t come up short in the places where you need extra funds. Here are some key HR items that you should consider when planning a yearly budget.

Image of money set aside for HR budgeting items for next year.

Recruitment

There is one big question when it comes to employee recruitment: How many people do you expect to add next year? The answer to that question will dictate how much you’ll need to put into recruitment efforts for your business.

Employee recruitment can be expensive. The Society for Human Resource Management (SHRM) writes that the companies spent an average of $4,129 per hire in recruitment costs. These costs include attempts to find candidates and actions to help qualify those targeted recruits, such as:

  • Advertising
  • Travel and events (ex. College job fairs)
  • Drug testing
  • Background checks
  • Agency fees
  • Relocation

Whether you’re looking to expand your staff or work in a high turnover business, you should create a budget for your planned recruiting efforts. If you’ve been keeping track of how much you’ve spent on recruiting in past years, extrapolate that number based on how many candidates you want to hire in the coming year so that you don’t come up short when you need to fill an important position.

Training and Development

Once you hire new employees, you’ll need to train them. Not only can training better prepare your new employees for their positions, “95 percent of hiring managers considered employee training as a key retention tool,” according to a study conducted by the Chartered Institute of Personnel and Development.

Of course, training and development costs money. According to the Association for Talent Development, the average cost of training is $1,888 per employee for businesses with fewer than 500 workers. These costs can include:

  • Internal training programs
  • Event registration fees
  • Travel expenses
  • Educational materials
  • Consulting fees

Compensation and Benefits

Payroll is one of the biggest items that you’ll have in your budget. The Houston Chronicle estimates that the average business spends somewhere between 15 to 30 percent of its gross revenue on payroll, although companies in the service industry may be closer to the 50 percent range. Regardless of your industry, make sure to take employee salaries into account, plus any estimated costs for any new employees you expect to add on in the coming year.

Salaries are a huge part of your compensation budget, but there are other considerations as well, such as payroll management costs, potential overtime hours, and any incentive programs. There’s also a wide variety of benefits that you may offer to your employees that will require a portion of your budget. 

According to SHRM, the “average cost of providing healthcare makes up 7.6 percent of a company’s annual operating budget.” This cost doesn’t necessarily include other attractive benefits, such as life insurance or retirement plans.

Employee and Labor Relations

While compensation, benefits, and training can go a long way toward improving employee morale, there are some other measures you can take to reward workers. These include:

  • Service awards
  • Recognition efforts
  • Performance and attendance incentives
  • Company events
  • Employee birthday perks and gifts

These items may not make up a massive part of your budget compared to other key HR needs, but they can be important additions to your company culture. Also, you never want to find out that you have to cancel those service awards because you forgot to plan ahead for them in past budgeting meetings. 

On the flip side, you may also want to consider setting aside a small portion of the budget in case you face any labor relations issues. Budgeting for outplacement or legal fees can help your business prepare in case you have any unexpected issues in the upcoming year. 

Health, Safety, and Security

HR budgeting also gives you a chance to invest in the well-being of your employees by making your work environment a safer, healthier place. By putting aside some of the budget for certain programs or initiatives, your business can reap the rewards of focusing on health, safety, and security.

In terms of workplace safety, GMS’ own Jeff Costin notes that workplace safety programs can increase workplace productivity, improve retention rates, and reduce costs affiliated with injuries at work. Budgeting for safety training programs, new safety manuals, regular inspections, and other strategies can help you manage workers’ compensation claims costs and make your workplace safer in the coming year.

Budgeting for health-related programs can also be a worthwhile expense to plan for the next year, as 75 percent of all healthcare costs are attributed to preventable conditions. A workplace wellness program can help your employees develop a healthier lifestyle through a variety of initiatives, such as:

  • Smoking cessation programs
  • The addition of a fitness facility or space
  • Health screenings
  • Lunch and learn events

An HR Budgeting Partner

Once you have your HR budget in place, you’ll need to have the infrastructure in place to move forward with all your plans and manage your HR administration needs. A Professional Employer Organization helps businesses manage their HR functions, including payroll and benefits administration. 

If you have any questions of how to get the most out of your HR budget or are worried about any compliance concerns associated with managing HR items, contact GMS today to talk with one of our experts about how we can help your business prepare for the future.

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