Within your corporate budget is a more specific budget that can be one of the most difficult to manage: your compensation budget. Compensation budgets can be difficult for several reasons, including the human factor behind each number and the tough decisions that must be made. Because of the fact that every number on a compensation budget relates to someone you know, the guidelines you use when creating your personal budget are especially applicable to creating your compensation budget. Take a look at these three similarities between personal and compensation budgets and see how the strategies you use in your personal budget can also make a difference in how you budget for compensation.
Saying no to people, not just things
Sometimes the hardest part about budgeting your personal finances is saying no to the people in your life, not just to the things you would like to have. Whether it’s your friends inviting you on a group vacation or your children begging for the soon-to-be-released PlayStation 4, we all know how difficult it is to disappoint others. In a similar way, behind every number on your compensation budget is a real person who is directly affected by that budget. This can make it extremely difficult to be fiscally responsible, but the reality is that you must. Ideally you would be able to take that vacation and buy the PS4, or give John a raise and hire two new employees, but sometimes that’s just not the case.
Keep in mind that while you do have to sometimes say no, it’s important to make sure you’re saying yes to the right things and people. And although no is never easy, it’s often a decision that is made for the better of the company.
Splurging on what’s important
The majority of us have a few must-have items in our personal budgets that aren’t so budget friendly but make a huge difference in our day-to-day lives. For instance, when I was just out of college my source of transportation was a gifted, past-its-prime mini van that was getting worse by the day. Against the advice of my entire family, I sold the mini van and took on my first car payment. While it did stretch my budget, it was also one of the best decisions I could have made as it provided peace of mind and kept me from dreading my daily commute.
In the same way, your compensation budget may have some splurges but that’s ok, as long as they are worth every penny to ensure retention. If you have a couple of people on your team that you couldn’t live without, make sure they’re taken care of, because the truth is what is a splurge to you may be a drop in the bucket for another company that would love to have them. One of the most concrete ways to show your employees they are appreciated is to compensate them fairly.
Planning for the future
Planning for the future is something that many of us struggle with but it’s vital to a healthy budget. This is also true of your compensation budget, which will determine your staffing for the next year or so. As you make adjustments to your current staff’s salaries, keep in mind that you’ll likely see changes within your staffing over the next year, so you may want to give yourself some wiggle room to adjust to staffing changes. This is also a good time to look over the next year and evaluate what the anticipated workload will look like. Will the company be facing any change that could affect your department? Are executives anticipating any major projects? If so, you’ll want to plan for increased or adjusted staffing.
Do you have any personal budgeting strategies that you also apply to your compensation budget? Let us know in the comments section below.