Speaker 1: Hi guys, welcome to HR Fandas. We are heading towards the end of this financial year and most of the HR heads will be preparing the HR budget for the next year. So I thought of sharing a few tips on the budgeting exercise with you. So why HR budgeting is important? HR budgeting is important as it will help you forecast the number of people required for the next year and when. It will also help you plan your HR activities and allocate funds accordingly. So it helps organizations understand their staffing needs, keeps expenses in check, prioritizes tasks and helps in managing funds for potential problems. So in case there are some ad-hoc expenses which come into picture, then you know how much is your budget and hence those ad-hoc expenses can be handled. Now what are the skills that you would need to be able to make the HR budget? So the most important skill definitely is to be able to understand the maths and to be able to understand the numbers. So you should be able to read the excel sheet and derive conclusions out of it. Also, you should know your roadmap for the next year as that will drive the numbers and projections for the year. You should be able to understand the ROI that you will be able to achieve after investing in training programs or HR software or employee engagement programs or the various channels of recruitment. Now HR is considered as a cost center and so the costs have to be justified and checked. You will know exactly when to start hiring and onboarding the new employees if you have done the planning right. It will also help you analyze which HR activities are consuming a lot of costs but not giving you the right ROI. So the things that you will have to consider before budgeting are what are your priorities? So what is going to be the focus of the year? So are you on a massive hiring spree so then obviously your recruitment becomes your first priority or is it that trainings have to be mandated and there are certain specific trainings that you are looking for? So in that case your focus is going to be trainings or employee engagement. So what is it that you are aiming for this year? So that needs to be established first. Look with fresh eyes. So when you read the HR budget for this year or maybe for the last year, you should not go with the flow. You should be able to understand like I mentioned earlier which activity is giving you right ROI and which one is not. So if something is not giving you the right ROI then probably you need to make some changes there so that the department benefits. Evaluate what you want to achieve. So again if the priorities are right then you will have the answer for this question with you. Now in case your company is willing to give you the additional budget or any additional cost that you might incur then it's great. But in case your company wants you to stick to the budget however certain new things have to be introduced so you may have to let go of certain other things which are taking a lot of budget from your sheet and you will have to allocate this budget elsewhere. Now how to make the HR budget? So the first thing is that you should review the budgets of the previous years. So when you do that you will get a clarity on your critical tasks and the costs associated with it. Analyze HR costs for each HR function. So you should be able to break down all the HR functions and then you should know how much cost is being allocated to each function. Also you should meet the HODs from all departments to understand their manpower requirement. They may also share the employee challenges with you. So what are the challenges that their teams are facing. So you will get an idea on what kind of retention or employee engagement activities you should delve into this year. Prepare an excel sheet and break it down month by month. So this way you will know how much to spend this month and in case you overshoot your budget you will know by how much and this can be adjusted in the remaining year. So this way you will be on top of your budget at all times. So whatever your budget is for training or for recruitment so you can divide it on a month on month basis and hence there will be A you will have a substantial amount and B you will know whether you have spent the money appropriately or not. Now to make a training budget. So training is something that you will have to first figure out what kind of training programs that you need. Now the first thing is that you can have a percentage of the salary budget. So on the basis of what kind of trainings are required you can take one or two percent of the payroll budget and then allocate that amount to various trainings. Second thing is ascertain cost of trainings based on training needs of the company. So let us say there are certain trainings which have to be done on a continuous basis and there are refresher trainings required for this one. So obviously this training is going to take up a lot of your budget. So hence you can do it on the basis of priority of the trainings. Or you can take industry average which is done by certain consultants industry wide as the benchmark. So every industry does a survey of payroll and other HR costs. So you can get a report from a reputed consultant and take that as a guideline. Take all training costs into consideration for example external trainers, travel of trainers and participants, training needs, print material, venue for the training in case you are looking at a huge audience or the projector or the screen. So these are various things that are going to cost a lot of amount and hence these should be factored in while making the training budget. So this is a sample of how a budget sheet will look like. So you can have, I have only included for 6 months. However this, you will have to add additional columns and this should be from April 19 to March 20. So you will have the number of employees, so on roll contractual and trainees because each one of them is going to incur some cost. Hence it's better to have the numbers here. So in case you are over budgeting then you can always go back and refer to this sheet. Now employee salary, I have broken it down into various salary components. However if you want you can just put a consolidated amount of how much the salary, employee salary is. Statutory compliances which would be PA, PSIC, label welfare or any other compliances that you follow in your region. Travel expenses, so when employees are going to travel for training purposes or for other HR functions, so those expenses will have to be counted for. Employee welfare, so all companies provide Medicare for their employees. Employee cafeteria is maintained in case you are providing meals also to employees, so that will have to be factored in. HR software, so there is going to be a monthly cost as well as an annual maintenance cost, so those will have to be put here. Admin expenses, so in case you have uniform staff, so their uniform expenses, non-due expenses. Employee engagement, so whatever activities you are going to do for employee engagement, for example, off sites or employee party, traditional day, family day, reward and recognition, those will have to be put here. Relocation expenses, so if certain employees are scheduled to be transferred from one location to another, so in case you already know that, those factors, those costs can be put in here. Training and development, as I mentioned earlier, all the costs will have to be factored in, so training aids or stationery and printout, external cleaners, venue, etc. So, these are just a sample. Obviously, it will vary for each and every company, so on the basis of what you are going to project in your budget, you will have to either add or strike off certain things from here. The most important thing or the most important tip that I have for you is that you should monitor your budget every month, else the purpose of the whole activity is defeated. So, this is very, very important. You should always be on top of your budget and only then you will be able to maximize the budgeting exercise. So, I hope you like this video and these tips will be very useful for you. If you liked it, please subscribe to my channel and thank you for watching.