HR planning (costs associated with managing human resources) is an important component of a company's financial planning.
It allows for the effective allocation of the budget for attracting, retaining, and developing employees, thereby ensuring the achievement of the organization's strategic goals. Below are the main components of HR costs and the methods for calculating them.
In today's material, we will not only cover the basic principles of planning but also provide good and bad examples. After all, examples from our lives are the most important.
In today's material, we will not only cover the basic principles of planning but also provide good and bad examples. After all, examples from our lives are the most important.
HR Planning: Basic Principles
Let's start by examining the elements that fall under HR costs. In addition to traditional salaries, benefits, and compensations, this may include recruitment and training expenses. We will discuss these in more detail.
Salaries and Bonuses
This category includes employees' base salaries, bonuses and incentives for meeting and exceeding targets, as well as hourly payments for employees whose work is calculated on an hourly basis.
Social Benefits and Compensations
This group of costs includes employer contributions to social funds, medical insurance, pension contributions, as well as payment for sick leave and vacations.
Recruitment and Hiring Expenses
Some methodologies recommend including costs related to hiring new personnel in HR plans, specifically the payment for recruitment agency services, expenses for posting and advertising job vacancies, and the costs of HR department resources for conducting interviews and evaluating candidates.
Training and Development
This group can include expenses for conducting internal training events, payment for external courses and workshops, as well as professional development programs for employees.
Equipment and Administrative Expenses
Including costs for workplace equipment and salaries of HR department employees can be categorized separately or grouped with more traditional expense categories, depending on the methodology adopted by the company.
Salaries and Bonuses
This category includes employees' base salaries, bonuses and incentives for meeting and exceeding targets, as well as hourly payments for employees whose work is calculated on an hourly basis.
Social Benefits and Compensations
This group of costs includes employer contributions to social funds, medical insurance, pension contributions, as well as payment for sick leave and vacations.
Recruitment and Hiring Expenses
Some methodologies recommend including costs related to hiring new personnel in HR plans, specifically the payment for recruitment agency services, expenses for posting and advertising job vacancies, and the costs of HR department resources for conducting interviews and evaluating candidates.
Training and Development
This group can include expenses for conducting internal training events, payment for external courses and workshops, as well as professional development programs for employees.
Equipment and Administrative Expenses
Including costs for workplace equipment and salaries of HR department employees can be categorized separately or grouped with more traditional expense categories, depending on the methodology adopted by the company.
Methods for Calculating HR Costs
HR planning requires considering numerous factors and the company's strategy.
Thus, the first step in HR planning is always analyzing current personnel costs. It is advisable to distribute all expenses across different categories and segments. In the long run, this will help to understand in more detail what kind of employees the company needs.
The next step is to calculate the required staffing based on the company's strategic plans. Without understanding the strategic goals, it is impossible to accurately calculate the needed personnel. Otherwise, the team will be assembled for ad-hoc tasks. Yes, new employees will help reduce the workload in the moment, but they will also need to be occupied with something later.
For an accurate plan calculation, it is necessary to thoroughly understand all charges for each employee. Moreover, if the company has a grading system that affects salary levels, employee promotions should also be accounted for in the plan.
It is also important to consider the inflation rate and the wage market to attract the highest quality candidates.
HR planning must also account for the cost of hiring, employee turnover, and return on investment in training. Ignoring these parameters can negate all the expenses on attracting professionals, for instance, through uncomfortable working conditions that cause candidates to leave the company.
Specialized planning systems, such as Spreadym, which work in conjunction with the company's accounting system, can help effectively manage this data.
With the help of specialized systems, it becomes easy to analyze actual and planned indicators, build different cost models, and simulate scenarios.
Thus, the first step in HR planning is always analyzing current personnel costs. It is advisable to distribute all expenses across different categories and segments. In the long run, this will help to understand in more detail what kind of employees the company needs.
The next step is to calculate the required staffing based on the company's strategic plans. Without understanding the strategic goals, it is impossible to accurately calculate the needed personnel. Otherwise, the team will be assembled for ad-hoc tasks. Yes, new employees will help reduce the workload in the moment, but they will also need to be occupied with something later.
For an accurate plan calculation, it is necessary to thoroughly understand all charges for each employee. Moreover, if the company has a grading system that affects salary levels, employee promotions should also be accounted for in the plan.
It is also important to consider the inflation rate and the wage market to attract the highest quality candidates.
HR planning must also account for the cost of hiring, employee turnover, and return on investment in training. Ignoring these parameters can negate all the expenses on attracting professionals, for instance, through uncomfortable working conditions that cause candidates to leave the company.
Specialized planning systems, such as Spreadym, which work in conjunction with the company's accounting system, can help effectively manage this data.
With the help of specialized systems, it becomes easy to analyze actual and planned indicators, build different cost models, and simulate scenarios.
Good HR Planning
Let's consider good HR planning for a medium-sized business using the example of the company "In Order". Here, we will see how the company can structure its HR costs, forecast personnel needs, and effectively allocate the budget.
To begin with, the company has set a goal for the upcoming year to increase sales volumes by 20%. In addition, the company plans to launch a new product and increase employee satisfaction to 90%.
To achieve these goals, the company plans to hire 10 new employees for the development of the new product, implement training and professional development programs for current employees, and improve the motivation and bonus system to reduce employee turnover.
The HR strategy points here are very important and can lead to significant cost savings. For example, by reducing employee turnover, the costs of hiring new personnel will decrease, and labor productivity will increase because employees will be more motivated to continue their careers within the company rather than seeking alternative employment options.
Moreover, investments in training will indeed be returnable in this case: the new competencies of employees will remain within the company.
With a clear development plan, the company understands at what stage which specialists it will need, and thus the business gains a clear understanding of investments in its own development.
To begin with, the company has set a goal for the upcoming year to increase sales volumes by 20%. In addition, the company plans to launch a new product and increase employee satisfaction to 90%.
To achieve these goals, the company plans to hire 10 new employees for the development of the new product, implement training and professional development programs for current employees, and improve the motivation and bonus system to reduce employee turnover.
The HR strategy points here are very important and can lead to significant cost savings. For example, by reducing employee turnover, the costs of hiring new personnel will decrease, and labor productivity will increase because employees will be more motivated to continue their careers within the company rather than seeking alternative employment options.
Moreover, investments in training will indeed be returnable in this case: the new competencies of employees will remain within the company.
With a clear development plan, the company understands at what stage which specialists it will need, and thus the business gains a clear understanding of investments in its own development.
Example of Poor HR Planning
Now, let's examine how the process is managed in the company "Disorder".
The company's strategic goal is to increase sales by 15%, but the company has not synchronized this goal with its hiring policies. Thus, the company lacks a concrete strategy for attracting personnel and has no plan for retaining employees.
All personnel costs increase year over year by the inflation rate, precise analytics are not conducted, and the budget is formed only at a high level, by broad categories.
Hiring is carried out spontaneously, without considering growth plans and changes, as well as seasonal fluctuations. As a result, the company always has either a surplus or a shortage of employees, which negatively affects operational activities and financial indicators.
Additionally, there is high employee turnover and uncontrollable hiring costs, as well as a lack of target metrics and analytics.
Effective HR planning requires attention to detail, the use of up-to-date data, and the willingness to adapt to changes. Achieving such flexibility is possible with modern planning and analysis solutions.
The company's strategic goal is to increase sales by 15%, but the company has not synchronized this goal with its hiring policies. Thus, the company lacks a concrete strategy for attracting personnel and has no plan for retaining employees.
All personnel costs increase year over year by the inflation rate, precise analytics are not conducted, and the budget is formed only at a high level, by broad categories.
Hiring is carried out spontaneously, without considering growth plans and changes, as well as seasonal fluctuations. As a result, the company always has either a surplus or a shortage of employees, which negatively affects operational activities and financial indicators.
Additionally, there is high employee turnover and uncontrollable hiring costs, as well as a lack of target metrics and analytics.
Effective HR planning requires attention to detail, the use of up-to-date data, and the willingness to adapt to changes. Achieving such flexibility is possible with modern planning and analysis solutions.
Effective HR planning requires attention to detail, the use of current data, and the readiness to adapt to changes. Achieving such flexibility can be facilitated by modern planning and analysis solutions.
