You Are Not Alone: Most People (in Business) Worry About Financial Horrors. Part 2 of 5: Pesky HR Costs

5 HR Essentials Blog Series cont.Last week we talked about Purpose Power; specifically how a clear purpose statement can help build a strong HR foundation for your business and fuel growth.This is how we wrapped up last week’s post.Your purpose and the values at the heart of your business must be carefully crafted and compellingly communicated to your customers, employees and associate community. With this sorted, you will absolutely minimise the risk of your business becoming adrift; lost without focus.This week’s post can be read as a stand-alone piece. But this second episode packs more value and has better flow if you quickly pop over to last week’s post and come right back.Fantastic! Let’s move on to the next course with a generous serving of actionable tips how to side-step the pain caused by often missed HR mistakes.Picture this. You are immersed in creating and designing. Buzzing, you are a whirl of service ideas and product launches. You are consumed with serving your customers and making sales and generating revenue. This is what you were meant to do.I am sure you have spreadsheets, dashboards, apps, and software programmes tracking all of this quality activity; but have you got your critical HR financials covered? I mean really covered!It may seem trifling, but do you really want to experience how much of a bite poorly planned HR financials can take out of your revenue and your emotional well-being?

HR Essential #2: HR Operating Budget Line Items (a.k.a Pesky HR costs)

Before we start, let’s get a few things straight.

The following checklist is a brainpoke to help you focus on what really matters to the business of growing your business.

As with any financial-related matter, you will need to ensure that you comply with the applicable financial regulations, employment and tax laws of the jurisdiction in which you operate.

I am no financial whizz nor accounting sage. I have absolutely no desire to be neither whizz nor sage. I’m a proud HR practitioner down to the marrow of my bones. This quote sums up my instinctive reaction to financials.

“To hell with numbers and those who live and die by the spreadsheet.” Imperial Black.

Aha!

Here’s what I figured out from making my own mistakes and picking up some steal-worthy tips working with some super smart financial pros and independent business owners.Over time I have come to realise these cardinal truths. If you are serious about creating a distinctive, successful, value-driven business like artisan cult brand Imperial Black, you will need to:

1. Reject the conventional view of HR as a cost centre.2. Embrace the HR function as a value hub and believe that harnessing your people’s talents and belief in your brand is the difference between a thriving or stagnating business.3. Plan and make adequate provision for your people and HR function-related costs in advance. Create an HR operating budget.Why? Because when unexpected HR costs occur, they bite you hard and cause pain.How can you avoid this pain? Be proactive in your HR financial planning. When you take this approach, HR ‘costs’ quickly transform into ‘investments’. With careful stewardship, these ‘investments’ bring value to your business.Here is a handy checklist of 7 HR Operating Budget Line Items to get you started. With smart planning you can turn these Pesky HR Costs in to HR Value Add-Ins.1. Base Salaries and Wages:  Structure your pay rates according to the value of the job to your business; not how much you can get away with paying someone. Resist the urge to make ‘cost savings’ here as doing this can result in significant damage to your (employer) brand and disruption to your business.Cheryl Conner's Forbes article, 'The 20 Critical Steps To Business Success' is a top read for entrepreneurs. Critical step #19 zeros in on the potential HR-related financial pitfalls.

“Founders leave early participants on the payroll long beyond the value they bring. The cost is astronomical, as payroll is destined to be your largest recurring expense.”

On the topic of paying yourself; “smart owners think of the company’s finances differently. They pay themselves a reasonable salary. But they also retain revenue needed for the development of new products and to aid in growth.”2. Statutory Benefits: These are benefits which an employer is legally obligated to pay for and provide to their employees as determined by the laws of the jurisdiction in which the business operates. Typical examples of these are Social Security, vacation/holiday time and pay, sick leave and pay. You don’t need the drama. Pay them on time.3. Employee Perks and Benefits: Early thought and action is critical here if you are to attract the best talent. Start small with perks and benefits that will appeal to your target employees, boost your employer brand appeal and not bust your budget. As your business grows, scale up and expand the perks and benefits you offer. Here are some ideas.4. Recruitment: Depending on your business needs, expect to spend money on advertising or recruitment agency/head-hunter fees to attract talent to your organisation.5. Legal Fees: You never know when you may need to engage the services of a good legal counsel with specialist knowledge of employment law. Invest the time in learning the going rate for his/her services and get an idea of the financial costs to settle an employment relationship gone bad or other work related legal matters.6. Consultant or Freelancer Fees: Your business may not need or be in the position to hire a full time employed HR or Trainer or other HR specialist.As the Founder or owner, performing HR or other related tasks might not be the best use of your talents. These responsibilities can swiftly grow into a monster time-suck, taking you away from engaging with your customers and making sales.HR responsibilities will grow as your team grows. Consider engaging the services of a specialist for specific projects, time periods or assignments to ensure that part of your business doesn’t become a headache.7. Training and Development: In the heady early days of setting up the business, the know-how and skills to get the job done mainly rests with you. As you begin to build your team or expand your services and products, the need for continuous training and learning to remain relevant becomes business critical. There is only so much that can be done on your own or within the team. Ensure you make budget provision for access to external learning e.g. training providers, online courses, conferences etc.You don’t need to suffer business growing pains. Use this 7 point checklist as a guide to help you turn Pesky HR Costs into HR Value Add-ins for your business.I’m probably leaving out some information. What other tips can you provide about this issue? Let me know in the comments.Do share this post with someone who you know will find it helpful and valuable.Now that we have finished talking about those Pesky HR Costs; come back next week when I will share with you the next HR Essential on our hit list. Get ready for why you must fire fast but never furiously!You will not want to miss this one.Until we meet again next week down the HR Rabbit Hole…