Who is responsible for managing the human capital budget, which includes compensation and benefits?

The HR department, in collaboration with Finance, is responsible for managing the human capital budget, which encompasses compensation and benefits. This joint responsibility is critical because it ensures that both the strategic goals of the organization and the financial constraints are taken into account. The HR department provides insight on trends in employee compensation, benefits administration, and designing compensation packages that align with organizational objectives and employee needs. Meanwhile, the Finance department offers expertise in budgeting, forecasting, and financial management to effectively allocate resources and ensure fiscal responsibility.

By working together, HR and Finance can develop a comprehensive budget that not only aims to attract and retain talent through competitive compensation but also aligns with the overall financial strategy of the organization. This collaboration fosters a balanced approach where employee engagement and financial sustainability are prioritized, leading to better organizational performance.

Other options reflect a more limited or ineffective approach. For example, relying solely on the finance department might overlook critical HR insights into employee motivation and industry standards in compensation. Furthermore, relying on senior management without departmental input may lead to decisions that do not fully consider the implications for workforce engagement and satisfaction. Similarly, the role of external auditors is primarily focused on compliance and accuracy in financial reporting, rather than managing the budgeting process itself.