As remote work ushered in a new era of work, human resources shifted dramatically in the last two years. As a result, the modern-day HR professional is regarded as a value generator for the organization.
More than 80 percent of CEOs say that HR has taken the lead in responding to the impact of COVID-19, demonstrating how the C-suite relies on HR to rally the workforce during difficult times. Before 2020, cost reductions loomed large at the top of many companies' budget priority lists; however, this priority has understandably shifted.
In 2022, every modern business's main priority was to provide a fantastic employee experience to retain star employees in the talent war and enhance their brand reputation. Therefore, every modern HR professional should be aware of some core points while constructing a new HR budget plan.
Considerations for Planning HR Budget
1. Employee Wellbeing
According to a Deloitte report, individual employees see wellbeing as a high-level priority of workplace transformation. The report also found that companies adopting and adapting flexible working practices see a significant investment return.
80% of American workers said their jobs are stressful. Nearly half of them said they need help to improve their overall wellbeing.
On the other hand, employee wellness falls somewhere between the bottom and middle of the heap. During the economic slump in 2020, some companies were forced to cut back on their employee benefits. This has hurt employee morale and retention.
HR leaders must emphasize implementing better employee wellbeing initiatives that help employees feel and perform better at work. This is a key element to retain employees during such trying times.
2. Agile Rewards and Recognition
Manual rewards and recognition programs like regular performance reviews are slow and ineffective and are prone to human errors. In addition, they're also challenging to implement in a remote-first culture. Instead, incentives for performance should be immediate and automated.
Furthermore, HR departments are tasked with several important responsibilities, including employee engagement and recognition. With ever-increasing workloads and limited resources, it can be challenging to find time to engage with employees personally.
This is why the HR department should budget for a solution that allows for automated yet meaningful employee appreciation.
3. Workforce Shaping
At present, the human resources industry is dominated by automation. You'll see automated postings for jobs when you go to a job portal. An applicant tracking system (ATS) or resume parser usually auto-populates the job application with the applicant's resume and cover letter for recruitment.
Automation is a great time-saver, but it's also a significant cost-saver. But, one major upheaval that comes with HR automation is the eventual need for workforce shaping.
Workforce shaping is the process of redefining employee roles and responsibilities to meet the demand of a digitally transformed workplace.
For many organizations, labor is the single largest cost. Labor costs can account for as much as 70% of an organization's total costs. In a world where we may have less need for workers, businesses will have to start reshaping their workforces to fit the skills and talents required in the future.
4. Rebuild and Reskill the Workforce for the Future
The thing about digital transformation is that it's not just about technology. HR departments need to be agile and digitally savvy. They must help their companies re-organize themselves to be more efficient.
People management, performance management, leadership, recruiting, and many other areas need to be rethought and rewritten as a result of digital transformation. However, it's important to remember that it will take a long time and many resources to implement all of these new ideas. Therefore, you need to be really specific about what you want and explain what you want in terms of how other people will benefit from it.
5. Prioritize Diversity and Inclusion Initiatives
Glassdoor reports that one-third of company investments are expected to go towards DE&I initiatives. However, to determine the appropriate budget for DE&I, organizations must first assess the responsibilities they need to fulfil and the desired outcomes they want to achieve.
When it comes to paying, it's essential to identify any gaps in compensation for underrepresented groups. For example, according to the American Association of University Women (AAUW) report, women are paid less than men by about $6,000 on average.
Companies should determine their desired outcomes for D&I and what resources fit into their budget. They must also assess their D&I responsibilities and develop a plan to meet all of their obligations.
6. Harnessing HR Analytics
Data is the new currency of today's world. Without it, you might very well be shooting in the dark.
This stands true for HR too. Without data, HR leaders may not be able to make informed decisions that impact the company's growth and overall financial performance.
HR tools enable us to export data see trends and insights into the workforce by tracking employee data for more informed decision-making. It also helps stay organized and record progress without requiring large amounts of time or effort from busy professionals.
Gathering this information can be a way for HR professionals to increase efficiency and provide information that will benefit the employees, which will help the company as a whole.
7. Rapid Turnover Rates
According to the U.S. Bureau of Labor Statistics, 4 million Americans left their jobs voluntarily in July 2021 owing to the Great Resignation, a job-resignation boom spurred by companies increasingly providing remote work opportunities.
As a result, employee turnover will remain high as employees are exposed to better remote opportunities.
It means that the cost of replacing those employees and retraining the new hires should be an expense that HR should be aware of. Hence it's often advised to collect employee data to track talent movement and improve talent sourcing.
Why Every New Age HR Needs an Expense Management Platform?
Expense management is no longer just about the petty expenses of the employees. Expense management is the process of planning, organizing, controlling, and evaluating the money spent for business activities. It includes all of the expenses incurred by your organization and the staff within it.
Expense reports are the most critical and essential metrics that every company uses to track the travel and expenditure of their employees.
Expense management has always been a difficult task for HR departments. Creating an HR budget plan may appear simple at first, but keeping track of the budget becomes essential when more workforce difficulties, overhead expenditures, and budget management issues mount. This is because there are many difficulties, overheads, and budget management issues involved in the process.
For this reason, HR leaders must implement an effective expense management software that will make the ordinarily difficult task of HR budgeting much more easier and manageable.
In a Nutshell
Effective HR planning and budgeting define success as improving outcomes for employees, investors, and the company. Hence, the HR budget in 2022 will need to be restructured to accommodate the significant shifts in the new decade.