HR Strategy

4 Questions to Ask – and Answer – Before Annual Budget Meetings

By

Jon Evans

| Jan 31, 2019

At this point in the year, you might be in the throes of budgeting for the next one. Or maybe budgeting’s come and gone, and you’re wondering how to make sure your HR department has more input the next time around.

No matter where you are in the annual budgeting process, there’s a high likelihood you’re frustrated the company misses out on valuable insight because HR isn’t involved early enough.

Ensuring HR has a seat at the table helps your finance team build a budget that aligns with overall people strategy. It can also help your company ensure your staff isn’t growing faster than your business growth can support. However, figuring out initial answers to several key questions before stepping into any budget meetings is crucial to adding HR’s informed insight into the conversation.

Companywide: Merit or cost-of-living raise?

Identify which type of raise makes the most sense with the company’s people strategy. Compare compensation data within your industry to your internal pay. Bring that data to budget meetings and suggest merit or cost-of-living increases based on that information.

Merit raises can be effective for promoting performance, but if your company is below-market for compensation, a flat companywide increase such as a cost-of-living raise can help you bridge that gap.

Companywide: What’s the promotion percentage?

When you anticipate the budget allocation for promotions, reflect on the percentage of employees who were promoted in the last year. Is the company projected to grow slower or faster in the next year? That will influence how much needs to be set aside for promotions.

Companywide: How many new hires are anticipated?

Get input from leadership on the amount of new hires they anticipate making over the next year. This number will be linked to projected business growth, like the percentage of anticipated promotions, but will be based on new employees, not new positions for current employees.

It’s helpful to have separate line items for next year’s promoting and hiring, as new employees likely will require additional financial outlay for recruiting, onboarding and training.

HR department: What does the HR budget need to cover?

Based on initial numbers for anticipated promotions and hires, forecast budget allocations for support personnel and resources:

  • additional HR staff
  • benefits for a larger employee base
  • training and hardware costs for new hires
  • other HR-related expenses you can reasonably predict based on projected workforce numbers

Consider creating a few forecasts of HR expenses that will affect the whole company, such as benefits and professional development, based on varying growth projections. Try one where your company sees the same amount of growth as last year, and another where you double that rate. Or halve it. This helps communicate the reasoning behind your HR budget requests to business leaders and the finance team.

At this point, also consider investments that could save your company money in the long term. For example, the upfront costs of a wellness program could be offset down the road by a reduced overall healthcare expense for your organization. Intensive training or even re-skilling existing workers could reduce costs of recruiting and onboarding new hires while retaining institutional knowledge.

After next year’s head count is approved for departments outside of HR, you may need to revisit these numbers – but starting with an HR budget based on preliminary figures helps ensure you get more of the resources you need.

Annual budget planning for your company is a crucial time to show the value of strategic HR practices in your business. Use this time to demonstrate how partnering with HR makes life easier for your leaders, and they’ll have good reason to ensure HR’s input is well-represented in companywide decision-making.

About the Author

Jon Evans

Jon Evans, Paycom’s chief operations officer, has more than 25 years of diverse leadership experience in various business segments, including oil and gas and insurance markets. Evans’ past leadership responsibilities included leading Paycom’s accounting, legal and human resources functions. Prior to Paycom, he served as chief operating officer for Chickasaw Nation Industries and is currently a member of the Oklahoma Society of Certified Public Accountants.

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