HR on a budget

Morale is low and so are funds. So how do you keep your good staff happy without giving them a payrise?

In an uncertain economic environment, the pressure is on for HR managers and business owners to deliver results on a smaller budget. Companies are handing out redundancies and slashing their budgets, competitors are closing down and everyone is bunkering down for the next 12-to-24 months while company perks take the hit first.

Of course there’s a difference between the perks employees structure their lives around, like insurance, daycare and overtime, and the more frivolous perks, like croissants on Friday. However the boom years—where employees were a scarce commodity and employers were almost compelled to make a significant financial investment in employee retention strategies—are over, and these financial-based strategies are now not so prevalent. The focus back then was to throw an array of money and rewards at employees so they would stay and play with the organisation for a greater period of time. Unfortunately, many employee benefits and rewards did not correspond to higher employee productivity or performance; instead they eroded the bottom line.

As a result of these retention strategies, many employees formed high expectations in relation to rewards. Even in light of the current economy, there are still high expectations, particularly from Gen Y employees experiencing a recession for the first time. In the current market, employers are being forced to cut through the clutter, taking away many of these perks and employee benefits to protect their profit and ultimately ensure job security. This poses a serious conundrum for HR managers and employers, as employees still hold an expectation that they will receive—and often require—ongoing investment in their professional development. So we still need to attract, retain and develop employees while ensuring our legal compliance obligations are adhered to, but with a considerably smaller budget than last year and without the beer in the staff fridge. The question now is how do we do this?

There are five key phases to the employment lifecycle that require practical strategies for HR on a shoestring; these are attraction, development, retention, compliance and separation. And today’s economic situation will mean that most HR practitioners will need to re-evaluate their attraction, development and retention strategies to ensure they are in line with current business needs.


  • Bring your recruitment process in-house where possible. Outsourcing to recruitment agencies can cut into your HR budget.
  • Alternatively, approach your preferred recruitment provider and try to negotiate more favourable terms, discounted rates and more flexible payment arrangements.
  • Advertise on websites like Seek and your company website as it is free, as opposed to advertising in newspapers.
  • Conduct assessment centres or group interviews as opposed to one-on-one interviews with candidates, which can be time consuming and costly.
  • Introduce an Employee Referral Program, where you provide your existing employees with a financial (or non-financial) rewards for referring potential employees to the company, as opposed to costly external advertising. Your existing employees are often the best ambassadors for your brand if they are happy in their jobs and with your organisation.


  • Bring the training in-house so that more people can benefit from the investment and you will get more bang for your buck.
  • Continue with any leadership development programs that you have in place, just shift your focus to emotional resilience. Our leaders need to be trained and resilient to step up and manage the change that is required in the current market.
  • Train your managers in ‘coaching skills’ so that they can perform more on-the-job coaching with employees.
  • Purchase the HR tools—recruitment and performance management systems and processes—t works out significantly cheaper in the long run than trying to develop them yourself.
  • Team build. Do group training as opposed to investing in individual training programs.


  • Offer a range of non-financial benefits in lieu of payrises and bonuses to retain valuable employees such as time off in lieu, additional annual leave, access to in-house training and development programs etc.
  • Multi-skill employees by rotating them around the organisation or training them in other key areas of the business such as sales. You cannot have too many salespeople in the current market, and employees will value the additional skills and experience on their resume.
  • Offer flexible work arrangements to reduce your expenditure in salaries and wages. Ask for volunteers to go part time, or work five days and get paid for four days.
  • If you are faced with the risk of making positions redundant, consider some creative alternatives such as requesting people take accrued long service leave and annual leave or offer periods of unpaid leave but leave their job open.
  • Reconsider employee incentive schemes; are the KPIs realistic and achievable? Consider either deferring bonus payments or putting a freeze on performance bonuses until business performance improves.
  • Consider ‘freezing’ salaries for a period by advising employees that there will be no budgeted pay increases for 2009.
  • I agree 100% that recruitment fees take a large part of budget away.. I had my recruitment all inhouse, untill I found a company that’s super cheap but actualy real good at recruitment. and for 2% fee I can sleep at night knowing I never have to look over anither CV again.. Google Recruitment Alternative and you will find it..

  • Bianca make a valid point. Doing away with agency fees can have a positive impact on budgets, particularly if your agency charges “per candidate” fees. Still, it is important to ensure advertising reaches quality candidates. There are alternative marketing companies out there that target your campaigns to the right candidates and that only charge one flat fee. I know only charges $150 ex.GST for a custom written advertisement. It stays up online for a whole month and you even get a free advertisement on a second industry-specific job board. and run similar sorts of alternative marketing. It’s definitely worth looking into, particularly if you are struggling with budget restraints.

  • I have worked in HR Software space for years. HR Technology providers should be doing more to provide HR Specialist with better more cost effective tools to to enable them to do away with the expense of outsourcing recruitment. With web technology and the internet driving innovation, SME’s should be able to have access to solutions that rationalise HR spend, Focus Budgets and allow HR pros to focus on Strategy… Pay by the month. Manageable and Easy. Forget Scrolling through endless amounts of CV’s. Use CV searching an filtering to deliver you the best cadidates in a instant. Use web service integration to link your HR/Recruitment system to job boards: Seek, My Carrer, Jobs Jobs Jobs …

  • Matthew I agree 100%. The recruitment process has features much space to be streamlined, and the web can do a much better job in my opinion of making this happen. Your ‘non’ software package looks interesting. Are you a developer?

  • I’ve worked with a number of temporary and permanent placement agencies when filling holes in my personnel roster and I have to say I\’ve always been satisfied. Not only does it save me from the whole process of advertising for and weeding through dozens of applications and resumes, but often the placement company can provide verified recommendations for individual employees. Something that is invaluably useful to me in making a hiring decision, yet normally, were I to do it on my own, time consuming.