The HRM Managers have to understand the HRM Cost Base, mainly in the time, when the top management requests some cost cuts to prepare the organization for the recession. When the HR Managers have no clear idea about the structure of the HRM Costs and their foundation, they can make cuts, which are dangerous for the organization.
The HRM Cost Base is usually pretty simple and the organizations have usually very similar structure of the costs of the HRM Function. The main differences are usually in the training costs as in some organizations, the training costs are the costs of the units or the HRM Function carries all the training costs of the organization.
The HRM Cost Base is usually built from the number of employees in the organization, the requests from the units, initiatives focused on the future of the organization and some legal requirements.
When the HRM Function has to cut the costs, it has to analyze all the requests from the units and prioritize them as the HRM Function cannot cancel all the activities. The nice-to-have activities have to be identified and the explanation has to be provided to the managers as they have to understand.
Usual HRM Cost Base
The recruitment costs usually seem to be the easiest ones, but the HRM Function cannot cancel all the recruitment activities as the organization cannot fully disappear from the job market. The costs to introduce the organization again would be much higher than the immediate savings.
