HR Budgeting in the midst of Covid-19 pandemic
Budgeting has always been a complex and laborious annual exercise. It requires examining various scenarios and going through multiple iterations. There is a bit of a crystal ball gazing as well. However, this year it is even more challenging with increased uncertainty and economic turmoil. It is extremely difficult to make future projections for the business with so many moving parts. Different industries are impacted differently;
“Some industries such as Technology and OTT are seeing an increase in demand. These companies have the challenge of keeping the employees engaged, motivated, and productive while working remotely and dealing with personal situations. While on the other hand there are industries such as Travel and Hospitality that have seen significant erosion in business and have to preserve capital to survive.”
HR heads have a tough task at hand of assessing the financial situation of their companies, understanding the risks emerging out of the pandemic, and balancing the people’s agenda. They would be under constant pressure to contribute to the effort of conserving cash and at the same negotiate funds for investments in areas that are critical for employees.
There is no one size fit all formula, however below are a few aspects to be looked at as one prepares this year HR budget:
- The most important part of the budget exercise is workforce planning. Based on the projections of individual business units, it is important to assess the optimal headcount requirements and where possible develop a workforce redeployment strategy to minimize job losses. This would require provisioning for reskilling efforts. In many cases, internal resources can be identified to conduct reskilling programs to save costs on external trainers.
- External recruitment is likely to be subdued this year and limited to junior positions and very specific roles. Therefore, the budget for recruitment-related expenses would continue to be lower than the pre-covid levels.
- The expenses on travel, employee reimbursements, team events, offsites will continue to below. Also, benefits such as subsidized food, creche facilities are not being utilized and can get lower allocations.
- Emphasis on learning and development should continue. With remote working, informal learning opportunities are reducing. Therefore more structured learning opportunities are necessary. Also, training team leaders and managers to manage a remote workforce is critical. The delivery mechanism of the programs is now virtual and through webinars. These are generally more cost-effective than in-person training. Therefore while keeping the learning hours per employee constant, there is an opportunity to optimize L&D costs.
- Salary increment budgets are likely to be modest this year with major emphasis on junior employees and retaining niche skills. The budget allocated would be less for mid and senior levels. Here, ESOP and long-term performance driven incentive plans can be used to keep them engaged and aligned to the organization’s objectives. Salary increment is a sensitive topic from the perspective of employee morale. Therefore open and transparent communication with employees regarding the company’s business performance and the capital situation can help them with the context in which decisions are being taken.
- Sales incentive programs need to be made effective and sufficiently budgeted for. Revenue targets should be set in the context of the current industry situation. Perhaps incentive cycles should be made shorter and rolling monthly revenue forecasts can be used to adjust the targets.
- Extended work from home is showing its toll on the workforce. This is not only a change in way of working but also a big social change for many. Not everyone has a dedicated workplace. Many couples live in joint families and have different demands on their time and attention. There is a significant increase in stress and anxiety amongst employees and blurring of work vs personal time is showing signs of burnout. It is important that the HR budgets for programs to promote physical and mental wellbeing. Access to counselors, fitness guides, and regular online programs are necessary to address this important aspect. This is one of the most important areas to be adequately funded.
- Lastly, organizations that do not have technology supporting the people function, need to budget for it as a priority. Virtual hiring, onboarding, collaboration, productivity, performance management are all important aspects to be digitized for effective remote working. This requires an investment that should most certainly be prioritized.
These are difficult times and demand difficult decisions to be made with conviction and strong will while at the same time keep communicating with the employees candidly.