How to Keep Going: HR Budget Reallocation

Conventionally, the HR budget is comprised of three large components: payroll budget, budget for employee training and development, and operating HR budget (covering the rest of the expenditure categories from recruiting to office parties). Initially, we drew up the budget for a year, later on, we did it twice a year, more recently — every three months. This allows for better budget management in a dynamic environment.

A pandemic is not just a change of environment, it’s «a black swan». It didn’t take us long to realise that we didn’t know how events would unfold in the long term (no-one knew, really). However, in just two weeks, we managed to transfer 90% of the employees to remote work and ensure prompt response to the daily inflow of the Government decisions (particularly, those imposing lockdown). The HR budget has been revised appropriately as well.

First of all, we have reviewed our plans and selected those that could be implemented remotely and those that could not (meaning that we had to scrap them or change their format). In the face of uncertainty, we have elaborated several scenarios:

• The optimistic scenario was based on the previously approved HR budget for 2020.

• The realistic scenario involved amendments in response to the changed conditions (the motto was, «everything essential is done but not overdone»).

• The moderately pessimistic scenario was formulated as follows: «the customary is abandoned in favour of the critically important.»

• The worst-case scenario included «the bare minimum needed for the business to survive». We haven’t yet developed the latter in detail; hopefully, we won’t have to.

The feature specific to the IT industry is the qualified personnel everyone lines up to hire. It’s not an «employer-driven market» but rather a «candidate-driven market». And this defines the boundaries we navigate: unlike at some other companies, it is crucial for us to maintain the budget for the key HR expenditure categories at the level to which the employees are accustomed. If the situation was different, our way of approaching the budget reallocation would be different as well.
So, to sum up, what has been adjusted? First and foremost, those expenditure items that are technically impossible under lockdown.

1. Corporate events: 50% reduction for the 2nd and 3rd quarters.

In 2019, we held 200+ events. The most expensive ones were the company’s summer anniversary celebrations held at our regional offices (Kazan, Moscow, Voronezh, Vladivostok, and Belgrade). Mass events are currently banned in this country — not that we’re going to hold them anyway. First, they pose a certain risk to the employees’ health. Second, many employees will choose not to attend for fear of infection.
Rewarding the best employees according to the year-end performance review has been switched to a different format: the director will congratulate the winners in a special address but their awards will be waiting for them at their workplaces — those will be the first things they will see on their first working day after the lockdown is lifted and the remote work mode is over. In doing so, we have cut down expenses by skipping the official part and saved on renting and catering.

Naturally, some of the activities related to sports (sports grounds rental, taking part in marathons, running courses) and environment protection (planting trees together, lake clean-ups) are not in demand now. We hope to return to them in the second half of the year.

Some events have not been waived, for example, giving presents to the retired employees on Victory Day. We have moved a lot of activities online: yoga classes, training courses, parties, home concerts, quests, environmental lectures. That has significantly reduced the costs while the engagement increased. For example, an online party brought together 400+ people. Most of the events have been organized by our employees — DJs, yoga instructors, quest writers. You can’t put a price on that.

2. Branded products and merchandise: up to 50% reduction (depending on the expenditure item)

We have cut the costs of corporate gifts for offline and office events by half. Online events have been supplied from last year’s stocks. Buying souvenirs in bulk for future use has proved to be both cheaper and more reliable: the contractor market and international shipping are currently under threat.

However, the budget for welcome kits for entry-level employees has remained intact. In 2019, our staff expanded by 400+ employees. This year, despite the lockdown, 100+ new employees have already been hired. Recruitment and new employees are our priorities, and we are not going to cut these expenses down.

3. Recruitment: redistribution of expenses within the expenditure category

We have opted out of renting premises for group job interviews because of the ban on mass events, factored in a slight reduction in costs due to the natural decrease in recruitment in other cities, and waived the services of recruitment agencies. Unfortunately, in our case, they have rarely provided the desired result. However, we have allocated more funds to the access to job search resources and preserved the referral program budget (a referral bonus is granted to anyone who successfully refers a candidate for a vacancy to be filled).

4. VHI (voluntary health insurance) and employees’ health and wellbeing: no reductions

The COVID-19 pandemic does not cancel out all other health issues; therefore, we do not cut the costs for voluntary health insurance. If any of our employees feels unwell, they’ll make an appointment at a commercial medical clinic and see a doctor at a specific time thus minimizing contact with other people waiting in line. They will also undergo a thorough examination and receive high-quality treatment. Moreover, voluntary health insurance is included in the employee benefits package that we provide upon recruitment. Making amendments to it means violating the employment contract. We haven’t suspended the new employees’ application and enrolment for the VHI coverage either.

Maintaining loyalty is the key

The first thing that should be triggered by a crisis is common sense. And common sense dictates that the «lost cause» attitude will not get things done. Budget reallocation forms a part of the crisis management strategy that we have developed during the pandemic and it provides valuable experience in a fast-changing environment.

Let me stress this point: when you decide to eliminate something that you’ve always provided for your employees, make sure they understand your decision. Otherwise, you risk losing their loyalty. Currently, the prime HR objective is to preserve the staff’s confidence in the future. And what works best here is a decent salary and benefits, open communication, the ability to maintain corporate spirit online and help your business develop while meeting its recruitment needs.