Budget and reducing of expenses: how to find a right way?

Budget: from theory to practice

Understanding of the budgeting system of expenses on personnel, unfortunately, is very often still at the level of distribution of salary funds for most companies. What is budgeting of expenses on personnel? In general, it is specification of expenses forecasted for certain period of time on personnel maintenance and completing of a company with employees. The process of budgeting gets through the following stages:

  1. Making of a project planning of budget expenses on personnel, in which such stages as defining of expenditure articles, human resource planning, economical effectiveness analysis of human resource management are included.
  2. Considering and approving of the budget which has passed through several stages of approving.
  3. Administration of the budget. It is the stage which is implemented during the whole accounting period.
  4. Budget control. It is also one of basic parts of the process of budgeting which is implemented together with the stage of administration.
  5. And, finally, budget administration analysis and preparing of reporting are also very important. They are so-called preliminary stage for making of a new budget. On the base of the report further planning will be provided.

HR budget reducing

Usually, a company which is aimed at reducing the budget, first stop using services of HR and consulting agencies and training companies. So, expenses on recruitment, development and training of personnel are cut. However, this is not the solution, because such expenses comprise not more than 6-7% from HR budget. Consequently, the next article of expenses which will be reduced is distribution of salary funds. Such tendencies lower the level of personnel motivation and can cause employee turnover. The best solution in this situation is to provide a business process optimization in the sphere of human resource management.

Adequate substitution: real opportunity or Utopia?

HR processes in conditions of a crisis should not be left behind. Business process optimization in the sphere of human resource management is an activity of a strong necessity.

Optimization of business processes can include the development of employees, trainings and motivation programs where all activities are conducted by managers, the chief or by heads of departments.

Providing of transparency and accessibility of information channels in a company are also a good way to optimize business processes successfully. Being aware of all changes in a company, employees start to think more positively. Informing of employees about current objectives and problems of the company provide the atmosphere of trust and team spirit.

Business process optimization in conditions of reducing of HR budget is not a simple task. However, this process can be provided successfully and have its positive results.


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