Human Resorces

Cost Allocation

How you allocate HR expenses relates to your organization's structure and business philosophy. A single-entity business would centralize its human resources costs into one budget, while a firm with multiple locations might opt to include HR-related line items for each unit's portion of compensation, training and recruitment expenses. Assigning these costs to the locations that benefit from them provides a more realistic assessment of profitability at the end of the year.

Recruitment

The HR budget should support your organization's strategic plan and objectives for the year. This requires estimating the number of workers needed. What you budget for recruitment depends on projected turnover rate, number of anticipated retirements and workforce needs for new projects or ventures. Costs related to recruitment include advertising, background checks, travel, relocation and any pre-employment testing you do. Other recruitment-related expenses may involve agency fees for temporary help, information technology cost for online posting and applications, employee ID cards and employee referral rewards. A centralized recruitment budget gives HR more control on the candidate selection process.

Related Reading: How to Calculate a Budgeted Profit

Training and Development

The HR budget has to cover two aspects of training: job skills and safety compliance. These can be internal programs or outside seminars. Handouts, equipment and location rental fees, manuals and trainer time represent typical expenses incurred with on-site training. Sending people to attend external programs means budgeting for travel, lodging and registration fees. Depending on company policy, you may want to have a line item in the HR budget to pay for employee certification exams.

Administration

Assign HR activities that support employee engagement such as recognition initiatives, awards for service milestones, company picnics and employee birthdays to a separate budget account or...