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Overlooked HR Budget and Its Consequences

By SiliconIndia   |   Thursday, May 24, 2012
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Overlooked HR Budget and Its Consequences


Bangalore: There is a clear link between the HR budget of an organization and the level of resignations faced by that organization. Most of the companies tend to allot fewer resources for HR department in the annual budget. But what these organizations do not understand is the hazardous effect this is having on the productivity and the employee engagement.

A recent survey on several organizations' HR budget showed some very interesting facts. The data showed significantly higher levels of resignations in the companies with low HR budgets. For the companies allotting more resources for the HR department, employee turnover rate is pretty low. The report says that the companies with short HR budget seem to spend more money in recruitment of new people, rather than providing the HR branch with proper resources.

Undoubtedly if the companies spend some more money for HR purposes that extra time, energy and cash spent on hiring new apprentices could have been saved. A well resourced HR division not only aid in employee retention, but it will also boost the productivity by amplifying employee satisfactions. Pleased workers can lead to better recruiting and retention processes and therefore reduces resignations. This method will also save the hidden costs of replacing resigned workers.

However, the reverse is not true. Companies spending very high amount on HR department do not see a interconnected drop in employee turnovers. Therefore, the relationship between HR budget and employee resignation is not linear. It is seen that there is an optimal level of resources that should be allotted for HR purposes for benefiting the organization. Spending more does not necessarily bring additional benefits, but being on par with the optimal level assures no harm for the organization.

It is now understandable that, "Money spent on HR is related to positive outcomes." So, deciding a benchmark range for HR budget will help the organization towards the right direction for organizational welfare.

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