HR Budget planning is a critical element of overall budget planning for any company. HR expenses range from 20% to 35% of revenue depending on the organization. More so, for service organizations, HR expenses account for more than 50% of the revenue.
This year is even more special because of the pandemic. Here are the 5 critical things to consider while HR Budget planning.
1. Business and HR Model
As per NSO’s first advance estimates, India’s real GDP growth in 2021-22 is estimated at 9.2%. The economy will be in a state of recovery this year. There will be more and enough opportunities for businesses to gain ground and expand. Hence this HR budget planning will demand an active collaboration with each functional and business leader.
This year will need more than just linear manpower planning. Strengthening Digital Infrastructure and change in customer behaviour will also present an opportunity to evaluate jobs, digitize processes, and optimize workforce for existing processes. Don’t forget to include redeployment and retraining costs in the budget.
Another important area will be to leverage the work from home, hybrid work model, and explore gig contracts. This may require a sharper focus on outcomes that can further optimize infrastructure cost, overall manpower cost, and the way of working.
2. Invisible Costs
There will be certain invisible costs that were not there in the HR Budget in the preceding years, so you can expect a surprise when those elements come up.
One unexpected cost will be the cost of leave accruals. Due to the second wave of pandemic, last year and the third wave of COVID at the beginning of 2022, most of the existing employees would not have gotten the chance to use their paid leaves. In case you are concerned about your brand image, you may like to encash part or all leaves or increase accrual limits.
The Government has also been bringing in multiple reforms. The new wage code is an indication of the same to be implemented from April 2022. Some companies might have to revise salary structure for their frontline workforce to comply with the regulations, while at the same time protecting the salary of the employees. Don’t miss to provision for these elements in your budget.
3. Employee Health and Safety
Like 2021, this year also you need to be more careful about employee health and safety. This is not limited to insurance negotiation where you must ensure coverage for COVID-19. Do provide decent corporate buffer to support employees.
Depending on the nature of your business, you may also like to provide for pandemic expenses like COVID testing, masks, and kits, immunity booster medicines, vaccination, sanitizers, travelling reimbursements (in separate cabs/autos).
You may also like to provide some amount for creating a positive healthcare experience which may include physical as well as mental health programs.
4. Digital Tools Cost
The change in environment triggers the need for digital tools. You may consider tools for communication, collaboration, work management, and data analytics. Some of these tools are available for free but they come with limitations.
Limitations of users, limitation of time, limitation of functionality. Sooner or later, you will have to opt for them to enhance the productivity of your employees. In some companies, this might fall under IT budget but this must not be missed.
If you are going to hire in large numbers and you are planning to do it yourself, you will experience a steep surge in the pricing of digital sourcing platforms. Please budget for it or be ready to explore some new platforms and open market techniques.
On the learning side, evaluate digital learning platforms with pre-configured content alongside traditional training approach. Even reimbursing subscription charges for digital learning platforms to employees interested in self-development can bring some value home.
5. Work from Home/ Hybrid Work Cost
Most companies have considered hybrid work or work from home settings, you might want to consider some expenses that will arise out of a home office. This depends on policy decisions as well.
Whether the employee will be responsible for his device, connectivity, and power, or whether the company will reimburse part of the amount to employee. In case you are planning to manage the whole thing on your own, do account for maintenance expenses as well.
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