How to minimize variations in the Human Capital Budget

Presupuesto de Capital HumanoAs we already know, human capital covers all the personnel that works for an organization. Every member of your human capital add value to your business model with their specific abilities; knowledge; and competencies. That is the reason why it is necessary to have an exclusive human capital budget that helps us manage their life cycle within the organization to achieve your business goals.

Now, what does human capital budget imply? Who takes care of doing it? Where do you start to do it? What are the specifications that the human capital budget must take into account? Also, how do we stick to our human capital budget, and avoid variations in it? Let’s answer each one of these questions.

How to create a human capital budget?

First of all, we must always keep in mind that the human capital budget is part of the general budget of any organized company.

In this sense, the human capital budget is subjected to different types of budgets and factors for the correct human capital management, and one of them is the items that govern the budget types. Let’s start from them.

Items for the allocation of the Human Capital Budget

The allocation of the human capital budget may come from two different sources: The Company’s Board or by the Human Resources Department. In both cases, the responsible for the correct administration of the human capital budget is always the Human Resources department.

In this order of ideas, Human Resources managers must clearly know what are the needs they need to cover with and from it, having a realistic projection of what each of them represents in financial terms. Also, they must report them correctly to the Accounting and Tax departments.

Then, the human capital budget must take into account the following demands and specifications:

Staff Selection and Promotion

At one end of the human resource capital management line, we find the expenses for staff selection and promotion. This concept includes expenses for printed material (internal formats and similar); the interviewer’s professional fees; costs for recruiting candidates in digital medias; space rental to carry out interviews if applicable, etc.

Also, it is necessary to have items for conferences to update personnel (conferences, courses, webinars, workshops, etc.); expenses for staff relocation; business trips; corporate lunches; travel expenses and similar.

Benefits and Compensations

Under this concept are the large expenses for payroll payments; portions of public and private health insurance; pensions (if applicable); life and disability insurance;  pre-natal, birth and post-natal leaves; assignment for vehicle use (if applicable), and similar concepts.

Also, there are the severance payments; associated tax payments; and bonuses for various concepts such as births, daycare, vacation plans; recognitions for good performance, etc.

Finally, and although this is usually optional, we count in this item we allocate expenses for collective celebrations and recognitions. End-of-year parties; toasts and snacks; recognition badges and buttons and commemorations of corporate milestones are included here.

Secondary Services for Staff Management

Here there are included the expenses for hiring temporary staff; outsourcing services; charges for corporate credit cards; pre-employment exams; office supplies; corroboration of personal history, etc.

Now, let’s delve into the several types of budgets to which human capital budget are subjected to with the purpose of discovering their relation to variations in the human capital budget.

Types of Budget

Static Budget

On the one hand, we have static budgets. They set a maximum output in terms of money, and do not adjust, tolerate or contemplate any variations. In other words, it is deterministic and inflexible; and its function is to set total limits within which we must manage the company’s money.

Flexible budget

On the other hand, we have flexible budgets. They adjust their numbers and limits according to real costs and their variations.

Their function is to contemplate and include such variations to achieve realistics projections regarding expenses and costs; and thus determining both, the nature of budget variations and their impact on operations. Also, there are two types of variations to be taken into account.

Types of Budget variations

Favorable Variations

Increases the utility of the budget in regards to the projections.

Unfavorable Variations

Decreases the utility of the budget in regards to the projections.

Variations of the Human Capital budget

Now, in addition to the elaboration of the human capital budget; there are also unplanned expenses and discrepancies that tend to bulge the human capital budget. To these noises and interferences is what we know as variations of the human capital budget.

In other words, the variations of the human capital budget is the difference between the static budget and the flexible budget. However, this fact branches into several elements subjected to financial analysis that should be highly automated. And speaking about automation…

Automated systems for Human Resource Management

Finally, at the other end of the human resource capital management line; we find the items for the purchase and administration of automated systems.

The question now is, can automated systems for human resource management help you to calculate the variations in the human capital budget; and help you to minimize their impacts?

The answer is  yes, they sure can. In the market there are many options, however; we advise you to make a comparative analysis before selection your choice. The expenses associated with the acquisition of the necessary tools will vary depending on the specifications and scope of the system you choose.

Here at FusionWorks we have everything you need for the correct calculation of your human capital budget. From advice to acquisition and moreover, for its configuring, implementation and deployment; we accompany you in your entire cycle to keep up with the business and economic objectives of the company; and soften the impacts of variation. Leave us your data to see your options.

Leave a Reply

Your email address will not be published. Required fields are marked *