Speaker 1: When it comes to business operation, budgeting is a critical business activity. Similarly, when it comes to HR budget, it's a critical activity that helps human resource managers and HR professionals to be able to make allocations or funds for all HR activities within a financial year. An HR budget, according to AI in HR, provides funds that are allocated specifically to all human resource processes across an organization. This is very critical because since the most important asset of a business is its people, the HR budget must be carefully planned out, communicated to, and approved by the leadership team. The locality of an HR budget to the success of human resource management within an organization cannot be overemphasized. For an organization to be able to attract, motivate, and retain its best talent, the organization must budget appropriate funds to be able to do that. When it comes to budgeting vis-a-vis HR budgets, there are two major types of budgets that are also critical and applicable to HR budgets. These two types are incremental HR budgets and zero-based HR budgets. By incremental HR budget, this is a type of budget that brings into consideration the budget from the previous year. Take for example, last year, HR had a budget of $10,000 and we spent the entire $10,000 last year. If we're going to take the incremental HR budget approach for this new financial year, it means we would be able to use the last year budget as a basis for the new year budget. We cannot be able to make an assumption that we will spend X percentage over what we spent last year. So last year, we budgeted $10,000. So if we're going to be doing an incremental HR budget approach, then this year we're going to be spending 5% more than what we budgeted for last year. On the reverse side, the zero-based HR budget is starting from scratch. It has no reference to the previous year's budget, which means we are starting afresh for all our planning and we will need to give justification for every fund that will be budgeted for HR activities. Now, when it now comes to the various areas that are covered within an HR budget, according to AI in HR, they came up with a very brilliant diagram and this diagram shows us the various areas that an HR budget should cover, starting with talent acquisition and recruitment. An organization will need to attract individuals into the organization and each of the recruitment activity, which comes under what we call costs per hire, is a cost that the organization will incur. The cost of advertisement, the cost of engaging the recruitment agency, and the cost of interviews, and the cost of acquisition of the new talent into the organization will need to be budgeted for. The definition of this means that if an organization is planning an expansion in the new financial year, HR will need to make extra allocation of funds to be able to fund that recruitment activity. Then, there is learning and development, including HR upskilling. For every learning and development initiative within a financial year, it needs to be budgeted for and that will go down into the learning and development costs within the HR budget. Then, the chunk of that will go into compensation and benefit. What is going to be the wage bill for this financial year? Last year, we had an employee of 100. This year, we're emphasizing an employee of 150. That 150 means there's going to be an increase in the wage bill. At the same vein, if there's going to be a reduction in the workforce, say for example, we are planning a massive rightsizing this year, each of those rightsizing or the numbers of employees that will be laid off will need to be budgeted for in terms of severance packages for all of them. Then, diversity, equity, and inclusion within the organization. What are we planning to do in terms of diversity for this year? What are we trying to do in terms of inclusion? Are we planning to celebrate International Women's Day in a grand style from what we did last year? You need to budget that. Employee engagement activities in these areas, all of this needs to be planned for. That takes us... The next area is employee relations and talent management. What are the talent management activities that we aim to engage in in the new financial year? All of that needs to be budgeted for. Then employee safety and well-being. The reality of the last couple of years has told us that wellness in the workplace is now a critical resource to the organization in terms of work-life balance and in terms of planning for the safety of your employees within the workspace. All of that needs to be planned for. Are we planning a massive HR technology shift or an HR transformation from one software to another? If we do not currently have a software within the system, are we planning within this financial year to migrate into or to acquire an HR software, either cloud-based or on-premise? Then that needs to go into your HR budget. Another critical area you must budget for is administration of human resources. That would create the running costs, the operational budget that HR needs to plan for within the budget for the year. Interestingly, I have a little gift for you. I'm going to be dropping a sample HR budget Excel template within the description of this video so that you can take a look at how it looks like. It's just a sample as it were and I want to believe that that would help you a great deal when you're thinking about your HR budget for the current financial year.