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Dear Workforce How Do We Devise a Budget

Dear Starting from Scratch:

The budget must reflect the competitive advantages that your company expects you to deliver.

Human resources professionals must:

  • Improve the return on human-capital investments, while also reducing costs
  • Cope with the attraction and retention challenges of an improving economy
  • Manage the challenges created by an aging workforce
  • Appropriately use outsourcing and/or offshoring capabilities
  • Use self-service tools to reduce costs and improve employee satisfaction

Our clients traditionally include four specific areas in their budgets.

1) Cost of functional operations. This includes:

  • Salaries
  • Benefits
  • General and administrative (offices, technology, travel)
  • Recruitment costs (search firms, Web pages, advertisements)

2) Cost of employee benefits. For example:

  • Health care, life insurance, dental, disability

3) Cost of special initiatives.

  • Feasibility studies (e.g., outsourcing, co-sourcing)
  • Expatriate assistance
  • Competitive positioning (compensation and benefits studies)
  • Governance (Sarbanes-Oxley and other regulatory compliance)
  • Employee self-service investments
  • Impact of aging workforce

4) Benchmarks. This should be a core aspect of any budgetary effort. Focus on:

  1. Overall cost compared to what the average is, and compared to what the “best in class” is, as measured by objective third parties (e.g., Hackett, Saratoga, Mellon)
  2. Performance indicators (for example, turnover or how long it takes to fill jobs, etc.)

SOURCE: Tom Casey, principal and eastern region practice leader, human resources management, Mellon’s Human Resources & Investor Solutions, Boston, September 20, 2004.

LEARN MORE: Strategic Human Resources Actions.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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