You are the newly appointed HR Director of Success4all Company. Success4all is an IT consulting firm specialising in the digitization of financial processes within global companies (Robotic process automation, Data analytics, Data visualisation etc.). Company headquarters are in Lyon (France). The company currently employs 400 staff, out of which 80% are consultants. The remaining are support functions (HR, Finance, IT, Legal).

You joined the company one month ago, on September 1^st, 2020. This morning, you met the companys Controller. She has informed you that you need to articulate a 2021 budget for your HR department before the end of next week.

Since you arrived in the company, you have had meetings with your HR team and also with senior and middle managers. Notes from these meetings are reported hereunder:

1/ Meeting with company CEO Mrs Lachenal:

Each consulting project lasts up to 12 months, with the development phase taking place within Success4all headquarters and the implementation phase on the clients premises. Company clients are located in every single major French city (Paris, Lyon, Marseille, Marseille, Bordeaux, Lille, Grenoble, Nantes etc.). Sucess4all is quite successful as companies have a growing interest in digitization of financial processes to cut costs.

Success4alls revenues have grown by 10% each year, resulting in the need for recruiting numerous consultants: project managers, developers, programmers etc. There is however severe competition as many traditional consulting firms (McKinsey, BCG, Cap Gemini) are trying to enter this booming market. Our consultants technical expertise, experience, and team working skills have thus far allowed the company to remain in a leadership position.

2/ Meetings with senior consultants (Project managers):

Senior consultants enjoy their work as it combines the need for permanently being up-to-date technically with the human side of managing a team of junior consultants on a project. They also said that it is great to work for a fast-growing company giving you the opportunity to learn new skills and be promoted. Senior consultants are quite stressed by long working hours and human resources managerial issues. They all have expressed growing concerns about junior consultants absenteeism and turnover. They reported that junior consultants work long hours and are often away from home on customers premises away from Lyon for full weeks. Senior consultants do not quite understand why the HR Department takes so long to hire new consultants.

3/ Meetings with HR team members:

The HR team is experienced and has been with the company for several years except 2 of them who joined recently. They seem committed but constantly complain about their computers and HR software:

we are an IT consulting firm but we work with archaic IT tools.

With your team you raised the concerns expressed by the senior consultants. Here are the answers that you received:

- Last year, the turnover rate grew up to 20%, a significant increase over previous years. No one really knows why this rate sharply increased.

- The absenteeism rate recently increased, with some senior and junior consultants out of office for long periods owing to burn-out syndrome.

- Recruitment time is quite long as there is sharp competition for IT consultants (both junior and senior) on the job market. To enhance recruitment pace, the Recruitment Manager has been using recruitment firms specialised in IT to approach specific profiles.

FINANCIALS

The companys controller provided you last week the with the HR Department expenses, showing forecasted costs for 2020 (actuals up to August + estimates for September to December).

20X1 HR department cost centre spreadsheet in 000s

Labour Costs
Salaries	325,000	Salaries of the permanent HR team
Benefits	162,500	Health benefits, life insurance, etc.
Profit Sharing	0	No profit sharing in 2020
Perks	26,400	Company car, meal expenses
Temporary Labour	35,000	Temporary HR staff
Total Labour	548,900

HR Team Costs (Direct Costs)
Travel	13,200	Travel of HR team
Consulting	6,000	Cost of the specialized recruiting agency
Training	24,000	Training the HR team
IT (Direct Costs)	1,200	Laptops, cell phones, HR team
Total HR Team Costs	44,400

HR Team Indirect Costs*
Facilities	8,000	Share of building rent and property taxes
Services	5,000	Share of receptionist, cleaning
IT (Indirect Costs)	11,000	Share of servers, IT team
Total Indirect Costs	24,000

Grand Total 617,300

*Indirect costs represent costs that are used by the whole company. They are allocated (shared) across departments using an allocation rate. Typically, facilities costs will be shared using area occupied: if the HR team occupies 10% of the office area, they are to be allocated 10% of the total facilities cost.

OTHER DETAILS

You asked questions related to the Financials and gathered the subsequent answers:

1/ Two non-recurring events occurred in 2020:

• Kelly was on maternity leave and was replaced by a temporary worker costing 35,000.
• The company celebrated its 10th anniversary and invited all its permanent employees to a ski weekend in Les 2 Alpes. The cost per employee was $400. For your HR team, it was recorded under Travel costs for $3,200 (8 staff x $400 per unit).

2/ HR team information:

The table below reports the annual gross salary of each HR department staff as of October 2020 (in $):

You	75,000
Jonas	24,000
Oliver	38,000
Kelly	32,000
Julia	52,000
Selim	28,000
Xing	41,000
Peder	43,000

As the HR Director, you are allocated a company car currently costing $1,000 per month. The leasing contract specifies that rental price is reviewed each year pursuant to inflation.

Every employee currently benefits from and $8 lunch allowance per working day (the value should increase to $8.5 in 2021). Employees are entitled to 5 weeks of vacation per year in addition to the 10 public holidays.

The company pays benefits at a rate of approximately 50% of gross salary (health and disability insurance, unemployment). Xing has been identified as a young talent and is taking a part-time masters degree in HR management, starting in January 2021. The programme is spans 2 years and will cost $8,000 per year (paid in January each year). For other HR employees, we expect training costs to remain comparable to 2020,

3/ HR initiatives:

You want to equip your HR team with new software. You have worked with the companys purchasing manager to estimate these costs. The right software tools, meeting your needs, costs around $150 per user, per month. You also anticipate roughly $5,000 in training expenses. You expect to install all tools in March. Other IT direct costs will remain as in 2020.

To facilitate the recruitment of junior consultants, Peder wants to:

• partake in 3 job fairs in engineering schools specialising in IT. Costs associated with this initiative are expected to reach $3,900 (mostly travel costs). The job fairs will happen in April, May and June.
• implement a referral gift policy, where if an employee introduces an applicant that is eventually hired, then the employee will receive a $300 gift voucher. We expect to recruit 20 consultants through this referral gift policy.
• develop our employer brand on social media. Peder has suggested we hire a branding agency to help us identify initiatives to improve our employer brand. The agency cost is estimated at $5,000; the project should take place in April/May.
• continue to use specialised recruitment firms for senior profiles, with the cost remaining as in 2020.

4/ Other information:

Your Comp & Ben manager has conducted a salary benchmark. It reveals that IT consultants salaries should be increased by 5% in 2021 whereas all other employees should be at 2% increase on average.

The company decided to implement a profit-sharing scheme in 2020 to reward their employees. Your Comp & Ben Manager has run some simulations with the controller and expects each employee to be entitled a $2,000 profit-sharing payout in 2021 (paid in February).

The controller informed you that the headquarters are to be renovated in 2021, resulting in Facilities costs increasing by 5%. She expects IT allocated costs to increase by 3% in 2021 as new servers are needed to support company growth. Lastly, she believes other costs will increase by 1% in 2021, due to price inflation.

Required:

1. Prepare your departments HR operating budget for 2021.
2. Show both the dollar variance and the percentage increase (or decrease) between your 2020 forecast (provided in the case) and the expected expenses for 2021.
3. Include a comment on each budget line item explaining your assumptions.
4. Draft a short memo (no more than one page) to the Controller summarizing your budget submission, and specifically explaining any changes to your budget for 2021, based on your assessment of the organizations needs and how your department can best support these.