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Blog Banner of Manpower Budgeting - Definition, Explanation, and Example

Manpower Budgeting – Definition, Explanation, and Example

Budgeting is an essential aspect of HR planning in any organization. It helps companies grow sustainably while assisting them in using the available resources more efficiently. The most expensive but critical resource for running a company is manpower.

Manpower budgeting can make or break your business growth. The challenge is many managers do not know how manpower budgeting in HR works. Budgeting is essential for covering the expenses related to recruitment, training, salaries, and benefits in the best manner for your company.

Manpower budgeting help companies take away any underlying surprises that can compromise or make it difficult to build a strong workforce. If you are repeatedly facing uncertainty with workforce management, hiring, and worker retention, you might need a manpower budget, as we are about to discuss.

Manpower budgeting involves systematically collecting data and information so that the finances needed to support a company’s production and service objectives can be projected. Every successful company has a manpower budgeting process in the overall HR management.

Before working on manpower budgeting, a company must create strategic planning to identify the annual goals and objectives. This is an important step in manpower budgeting as it allows the managers to concentrate the allotted budgets on supporting the planned objectives.

At companies, usually, there are two methods of manpower budgeting in HR.

  • Incremental budgeting: In this type of manpower budgeting, you adjust the current budget to align the output per the forecasted expectations.
  • Zero-based budgeting: In this form of manpower budgeting in HR, every item in the budget must be justified before it is included in the budget strategy. Therefore, it begins with a clean slate, no prior budgets involved.

Why do you need to plan a manpower budget?

Large businesses often focus on planning and forecasting to anticipate upcoming opportunities to keep their growth continuous and sustainable. Now, if the anticipated opportunities are realized and converted into a business, you will need workers and laborers to start working on them.

However, there is always a looming threat that you might overhire, and the increase in workers means additional labor costs that can eat up your revenues. This is why you need manpower budgeting to support hiring additional skilled manpower without derailing your annual budget.

This is achieved through manpower budgeting. As part of manpower budget planning, managers determine how and when new workers will be hired to work for the company. The process focuses on achieving the organization’s goal without extending the manpower budget or exploiting workers.

Manpower budgeting is mandatory for any company that wants to be prepared for the future with the adequate number of workers at their disposal necessary for prosperity. Workforce budgeting is different for every company, depending on the business objective.

Based on your company objectives, you have to create a custom budgeting plan to decide on improving the workers and the company.

How to prepare a manpower budget?

Manpower budgeting involves several steps, and the final process will depend on the type of workforce you employ and the existing HR budget policies.

1. Define the business goals

Your manpower budget planning must align with the business goals. The first step is determining your business’s priorities and then handling lesser critical areas. For instance, at large manufacturing units, it is essential to encourage HR to be involved in all areas of corporate strategy because they better understand the workforce requirement.

2. Review past budgets

It helps if you review the past budget for spending and performance data. It provides valuable insights for manpower budgeting as you learn and improve on the outcomes of the previous budgets.

3. Analyze and forecast worker needs

Planning for recruitment needs provides you an advantage when manpower budgeting. You must know the number of workers employed in every department and how the overall workforce number compares to the turnover rate and project performance.

4. Plan for the best and worst-case scenarios

Suppose you look at how manpower management was disrupted during the 2020-22 period due to the pandemic. In that case, it is a sign that manpower planning and budgeting can assist you in dealing with difficult situations easily. Your manpower budgeting must focus on the best and worst of the market.

For instance, if your company has an annual employee turnover of 5%, but if it increases to 20% due to a pandemic or economic slowdown, you need to have a budget planned to spend on recruiting more workers to replace the ones leaving.

Things to consider while creating a manpower budget

1. Tools for data collection

Manpower budgeting has data at its core, which is why companies must have tools to analyze trends in workforce management.

Truein is a cloud-based, hardware-less staff time and attendance management system that can help with manpower budgeting. It accurately logs workers’ working hours, records overtime hours, specializes in contractual workforce management, and features data-driven report generation.

Schedule a free demo today and see how Truein can help to track the attendance and working hours of workers.

2. Keep reviewing the manpower plan

Heads of the departments must keep reviewing the changes proposed to manpower planning to justify their relevancy and accuracy.

3. Training workers

Workers must be trained to have the best skills, knowledge, and understanding of their roles. The purpose of training must make them ready for current roles as well as future requirements.

Example of manpower budget

Construction companies make ideal manpower budget examples as they often face problems hiring workers for upcoming projects. As the construction industry has many laborers employed, attrition is also high. Such companies need to have the manpower available to handle forthcoming projects but also be vary to hiring too many workers.

Construction companies use forecasting and planning per the market requirements to remain operational and profitable in the long term.


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Manpower budgeting is essential for companies to ensure the availability of workers without overhiring or understaffing. Manpower budget planning allows businesses to maintain a pool of workers, forecasting training spending, and ensure the labor cost is always aligned with company revenue objectives.

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