Your human resource budget should take into account your organisations and divisions long and short term objectives and how you can assist with the achievement of those objectives. The budget should directly meet the overall corporate strategy for your business.
Your HR budget should be very comprehensive, including all expenses, allowing room for contingencies (normally around 10% of your total budget), as well as increments in costs of services that you may be using such as technology costs, training and development, recruitment agency fees, job advertisements costs, compensation and benefits packages, talent acquisition costs (referral fees, relocation costs, sign on bonus) etc.
Adequate funding is vital in order to make HR a strategic business partner and to determine your ROI (Return on Investment).
Before you can determine what your long term budget should be, you really need to think about the future of your HR division. What initiatives are being considered, what is the ballpark cost for those initiatives and when could they be implemented, based on your planning.
You may need to prioritise the initiatives that will have the biggest impact on the business first so that when you are asked to reduce your budget you have a general idea about which costs you consider essential.
Use as much reference material as you possibly can when determining your costs. Consider the previous year’s budget, call companies that you may need to engage and ask them for the quotes on the cost of their services, post questions on the HRiM forum and perhaps even share your budget with your team to find out if you have missed any important elements.