HR budgeting: a guide for the strategic leader

Feeling the pressure to make HR budget cuts? You’re not alone. 85% of global HR leaders felt pressure to reduce their spending last year, and two-thirds are finding the current business climate increasingly challenging.*

“People teams are truly feeling economic pressure, particularly in regards to budget cutbacks,” Leapsome’s Co-CEO and Co-Founder Jenny Podewills shared in a recent webinar.** 

To help HR leaders tackle these challenges, Jenny interviewed three experts: Pernilla Wranéus (VP and Global Head of People & Culture at Accedo), Marie Richter (fractional CPO and consultant), and Lee Bage (Group VP of People Operations at Valtech). They shared actionable strategies across three key themes: building a resilient budget, securing executive buy-in for HR investments, and optimizing tools and technology for efficiency.

This article unpacks their insights and explores how dedicated platforms like Leapsome can streamline HR processes, drive data-backed decisions, and support engagement — even under tight budget constraints.

💸 Time saved is money saved

Leapsome empowers People teams to do more with less and make the most out of their budgets.

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*Leapsome’s Workforce Trends Report, 2024

**Leapsome Strategic Budgeting for HR Leaders webinar, 2024
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The role of HR budgeting in driving strategic impact

HR budgeting plays a critical role in driving strategic impact by aligning resources with organizational priorities.

A well-planned HR budget ensures that People teams can invest in recruitment, employee development, and engagement initiatives that directly contribute to business goals. It also helps identify cost-saving opportunities and allocate funds to the most impactful programs — like performance management or workforce planning. 

Ultimately, effective HR budgeting enables organizations to maximize their return on investment (ROI) in people while maintaining agility in response to economic shifts.

When People professionals are under extra pressure due to economic conditions, effective HR technology and automation tools are more critical than ever. That’s because they help team members do more with less, get the highest ROI out of their initiatives, and ensure their processes align with organizational projects, priorities, and objectives.

Understanding the challenges of HR budgeting

Employee engagement, satisfaction, and development are all core parts of whether a company sinks or swims.

Yet, when HR budgets are crunched, people-centered initiatives are often among the first spending casualties, with leadership tending to underestimate their value. This can prove costly.

💬 “In times of economic uncertainty, businesses may be tempted to reduce their investment in people-centric programs like skills training, coaching, and recognition. However, this short-sighted approach risks lowering engagement and increasing turnover.

Protecting your business during tough times also means retaining top performers and high-potential employees. These programs are vital to maintaining the talent necessary for long-term success.”

— Luck Dookchitra, VP of People at Leapsome

Strategic HR management will always remain paramount — even as operational efficiency has to increase. Failing to prioritize these goals will, in the long run, increase employee turnover and associated costs and hinder the organization’s long-term success.

In fact, SHRM research found that the average cost per new hire was US$4,700 in 2022. This report and hiring calculator even estimates that hiring an executive can cost as much as US$30,000 to $50,000. That’s why it makes sense to retain top employees rather than making short-term budget cuts to the (literal) expense of everything else.

💡 Did you know? Leapsome’s turnover prediction and analysis tool can help you forecast future turnover rates, spot patterns, and address problems before they escalate.

Building a resilient & flexible HR budget

Your HR team needs to align with core organizational goals, prioritize employee needs, and maintain operational efficiency — without unnecessary spending or focusing solely on short-term objectives.

Let’s break down how to do that.
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1. Prioritize investments that align with business goals

HR departments will be more successful and face less resistance if they prioritize spending on tools and programs that clearly align with overall business goals.

This approach means looking outside of the usual HR silos and implementing changes and spending within the context of the rest of the organization. To do this effectively, you may need to talk with key stakeholders and executives to understand the company’s strategy more deeply.

This could lead to: 

• Maintaining focus on the big-picture objectives and strategy (even during redundancy rounds or budget cuts)
• Upskilling team members to fill internal skills and knowledge gaps
• Increasing engagement across departments

Lee Bage from Valtech offered a powerful example in our recent webinar: 

“Instead of reducing our team, we focused on creating efficiencies through a digital tech stack. This freed up resources for strategic work and allowed us to keep growing.”

It’s also important to avoid scaling down too much. This could make it difficult to get back up and running again when the economy begins to recover. Instead, consider:

• Working with more people on fixed-term contracts
• Hiring freelancers so you can be more reactive
• Develop existing employees rather than recruiting new people

This can help you do more with less without changing the company’s overall direction or strategy.
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2. Use data to make informed decisions

When you’re working with a smaller budget, explore your current figures, people analytics, and HR reporting to make data-guided decisions that make economic sense. 

As Julia Reis, Founder & Chief Consultant at Julia Reis Consulting, pointed out in our 2024 Workforce Trends Report: “Leveraging data helps People teams maximize impact even with limited resources.”

Backing your investment decisions with solid data will also make it easier to justify spending to senior executives (more on that below).

Holistic HR and people enablement software like Leapsome simplifies data collection and analysis, helping you make informed budget decisions. For example, you can send out engagement surveys with Leapsome Surveys, use our employee sentiment analysis tools and AI capabilities to quickly analyze responses and extract key themes, and understand where it would make the most sense to allocate an already-stretched budget.

🎧 Want to listen to the HR budgeting webinar yourself?

Learn how to maximize your HR budget in 2025 and beyond with Jenny Podewils, Pernilla Wranéus, Marie Richter, and Lee Bage. 

👉 Check it out here

3. Allocate resources for maximum impact

With limited resources, the best investments are those that drive the greatest impact across multiple departments and goals. 

Just as organizations adjust their focus for long-term sustainability during budget cuts, HR leaders should ensure that employee engagement, retention, and development remain strategic priorities even in challenging times.

During workforce reductions or hiring freezes, investing in the remaining team becomes even more critical. A positive work environment helps employees feel supported and secure amid uncertainty.

Strategies may include:

• Offering interesting learning opportunities
  
  
• Sharing consistent positive feedback and recognition (a praise wall can help!)
  
  
• Promoting employees internally
  
  
• Increasing salaries and/or providing additional benefits 

By taking these steps, organizations can emerge stronger from challenging periods while reinforcing a culture of support and resilience.
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Using a strategic approach to defending essential HR expenses

When budgets tighten, HR professionals often face increased scrutiny from executives and senior management, who may question the need for engagement initiatives or extra investment in employee retention amid cost-cutting measures. 

“Our research shows that teams often still struggle to provide and demonstrate the business case and ROI of some of their initiatives, and that’s even more pressuring at a time when you really need to prove that case in order to unlock or maintain some of your budget,” explained Jenny Podewils, Leapsome’s Co-Founder and Co-CEO, in a recent webinar.

Our 2024 Workforce Trends Report further highlights these challenges: 

• 60% of HR leaders struggle to build a business case for HR initiatives
• 62% find it difficult to gather supporting data
• 58% report trouble getting executive approval.

Given these hurdles, People teams must be prepared with data-backed strategies to justify their spending.
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1. Communicate ROI with tangible metrics  

Executives want to see clear ROI, and that’s where your data comes into play. When your budget allocation is based on concrete numbers, it’s simple to demonstrate why you want to make a certain investment, the goals it aligns with, and the expected return and benefits.  

“You always need to be on top of your data to really support your case for essential HR expenditure,” noted Jenny Podewils. “It may be making a case for a new program or showing the outcomes and the benefits of the programs you’re running.”

This might include using holistic HR and people enablement software like Leapsome to collect and analyze data on key metrics such as:

• Engagement levels of low performers and high performers
• How team members are responding to and interacting with company goals
• The employee lifecycle and areas for improvement
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2. Involve stakeholders early in the process  

Some say it’s better to seek forgiveness than permission — but when it comes to HR spending, it’s better to include key stakeholders as early as possible. This ensures that everyone understands the value of the investment from the start, making it easier to gain buy-in.

When HR builds business cases without key stakeholder collaboration, it can be harder to secure support. Instead, when HR leadership presents a unified vision, it’ll help them push for investments that’ll benefit both their department and the entire organization.

Effective methods to gain buy-in early on include: 

• Leveraging historical data from other similar initiatives or programs to show realistic outcomes and ROI
  
  
• Providing trial versions of a proposed tool to employees and stakeholders to show them the full experience and potential
  
  
• Doing a “soft launch” of a new tool, framework, activity, or project with a small group to get early feedback and see what’s working and what isn’t
  

These strategies help turn executives and other key stakeholders into strong allies.
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3. Learn from industry benchmarks & competitors

Citing successful examples from industry peers is another great way to demonstrate the value of your HR investments. 

Whether you compare your company’s metrics to the industry average or analyze the strengths and weaknesses of similar initiatives, positive examples from the field are a great way to get executives on board with your plans.

Gathering this information might involve:

• Researching industry reports
• Engaging in discussions with peers facing similar challenges
• Identifying best practices that can be adapted to your organization

Borrowing proven solutions from others can accelerate decision-making while demonstrating market relevance to executives.
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Optimizing HR tools & technology for efficiency

With fewer resources, every tool must prove its worth (and then some). Indeed, 85% of HR leaders are facing pressure to consolidate their tech stack and reduce spending.

At the same time, our 2024 Workforce Trends Report found that 98% of organizations consider HR tech mission-critical, with ease of use and all-in-one functionalities being top priorities.

“You want enough tools, but not too many,” explained Marie Richter. “Otherwise it’s too tough for people to consolidate their day-to-day work and build integrations.”

That’s why the best HR tech investments should be comprehensive and accessible. They should simplify processes through automation and AI while consolidating core HR functions into a single, cost-effective platform like Leapsome.

🤩 Worker smarter, not harder

Comprehensive solutions like Leapsome give you all the HR and people enablement tools you need in one intuitive place. 

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1. Map out the employee lifecycle to identify tech needs  

Outlining the employee journey in detail allows HR teams to identify the areas where technology can have the biggest impact. From attraction and retention to engagement and offboarding, each stage of a professional’s time with your organization can be enhanced and enriched with the right tools.

💡 Want to read about the employee lifecycle in detail? Our detailed guide outlines it and discusses how to improve engagement at each stage. 

Spoiler alert: Leapsome can help throughout it all. 💜

This may include the following steps:

• Developing (or revising) a detailed visualization of the employee lifecycle within your organization
• Identifying key factors that contribute to a positive employee experience
• Identifying where teams have skill and development gaps and taking action to address them

Lee Bage shared one example of this with us. His organization used to work with a yearly cycle where everyone would share feedback while looking back over the past 12 months. The process of collating and discussing the data, while valuable, took hours. Once the company pinpointed this issue, they started looking for tech tools to simplify it — cutting the cycle time from 12 to 6 weeks.

“It became a single tap and a huge ROI because we had the right system and tech stack,” he said.
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2. Evaluate scalability & integration 

A key aspect of flexible and resilient HR budgeting is ensuring it can grow and change with the company. That’s true whether the budget remains crunched for the foreseeable future or recovers faster than expected.

Similarly, investments make the most sense when they’ll continue to be useful in the long run, rather than as a short-term, quick-fix solution during a challenging economic time.

As such, the best HR technology can evolve with businesses as they scale, reducing the need for future investment and yet another software learning curve. A tool that integrates seamlessly into your HR processes — enhancing and simplifying your work rather than overcomplicating it — will always be a sound investment, even as your budget needs change.
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3. Leverage AI to enhance HR functions

AI tools for HR tasks enable teams to maximize efficiency and optimize workflows, ensuring they can accomplish more with fewer resources.

“For us, it's just been a question of doing more with less,” noted Pernilla Wraneus in our webinar.

The AI use cases for HR are endless — here are a few concrete examples of what you can do with Leapsome’s AI capabilities:

• Turn feedback into action by collating and analyzing survey comments, extracting summaries of key themes, and generating tailored, actionable recommendations
  
• Speed up and align goal creation by generating OKR suggestions that take all relevant context into account in just a few clicks
  
• Improve and enrich the performance review process by summarizing conversations and transforming notes into actionable, unbiased recommendations
  
• Visualize career paths in minutes by automatically creating detailed competency frameworks

Dig deeper into AI for HR

Our AI for HR webinar covers what your People team needs to know to unlock the potential of AI.

👉 Watch it now

HR technology is key for effective HR budgeting

HR leaders must build resilient, flexible budgets that align with broader company goals, while optimizing tools and processes for efficiency. 

As our industry experts discussed in our strategic budgeting webinar, success hinges on making data-driven decisions and strategic investments in employee engagement, development, and retention.

A holistic, people-centered HR platform like Leapsome is instrumental in strategic HR budgeting. Our comprehensive suite of tools allows you to leverage streamlined workflows, automations, and AI to do more with less — all while prioritizing the employee experience through satisfaction, development, and retention initiatives.

💪 Protect your HR budget during tough times

Leapsome empowers People teams with the data they need to increase engagement and get executive buy-in.

👉 Book a demo