Strategic Budget Planning

How HR and Payroll Professionals Can Help Small Companies Prepare Their 2026 Expense Budgets

Preparing an accurate and realistic expense budget is a critical process for companies aiming to achieve financial stability and growth. Human resources (HR) and payroll professionals play a vital role in this process, offering insights and expertise that go beyond wage calculations. As 2026 approaches, your involvement can make a significant difference in your company’s budgeting strategies. Consider the following:

Analyze Compensation Trends and Forecast Wage Expenses

HR and payroll professionals should have access to data on current compensation packages, wage trends, and anticipated market changes. If you don’t, let us know! MRA can help. With the benefit of this information, you can help project salary expenses for 2026 by accounting for increased or reduced wage expenses, minimum wage and cost-of-living adjustments, and competitive pay benchmarks. This proactive approach helps avoid any market or business-driven surprises. It will also help you align wage budget allocations with the business’s future objectives.

Review Benefits and Optimize Costs

Benefits such as health insurance, retirement plans, and paid time off are significant expenses. HR can assess the cost-effectiveness of existing benefit programs, compare options from multiple providers, and recommend adjustments that maintain employee satisfaction while controlling costs. Payroll professionals can provide historical data on benefit utilization, helping companies forecast future expenses more accurately.

Anticipate Workforce Changes and Staffing Needs

Growth plans, seasonal fluctuations, reorganizations, and turnover rates all impact staffing expenses. HR professionals can proactively collaborate with leadership to estimate new hiring needs, potential layoffs, or restructuring. Payroll teams can model the financial impact of these changes, including onboarding costs, severance, and overtime, ensuring the budget reflects realistic workforce scenarios.

Ensure Compliance and Plan for Regulatory Changes

Legislation affecting payroll taxes, benefits, and labor laws can change regularly. HR and payroll professionals should monitor upcoming regulations for 2026 and advise on compliance-related costs, such as new reporting requirements or mandatory benefits, such as paid leave. This foresight helps small companies avoid last-minute surprises and penalties. Companies should also plan for any potential administrative expenses, such as additional wages, and consulting or legal fees. Anyone else also have updating your employee handbook suddenly come to mind?

Leverage Technology and Process Improvements

Investments in HR and payroll software can streamline operations and reduce manual errors. Professionals in these departments can evaluate current systems, identify inefficiencies, and propose upgrades or automation that improve accuracy and save time. Although technological investments may require upfront costs, they often result in long-term savings and should be considered in the budgeting process. Develop your business case, highlighting the expected return on your company’s investment.

Collaborate on Cross-Departmental Budgeting

HR and payroll professionals can work with finance, operations, and department managers to align budget priorities. By sharing data and insights on workforce trends and cost drivers, they help create a holistic expense budget that supports business strategy, employee engagement, and financial health.

Conclusion

For small companies preparing their 2026 expense budgets, HR and payroll professionals are invaluable partners. Your diverse expertise in compensation, benefits, compliance, and process optimization enables companies to forecast expenses accurately, control costs, and plan for growth. By engaging these strategies early in the budgeting process, small businesses can build a solid foundation for financial success in the coming year.

For those who need some outside assistance, MRA can help. Contact us to learn how.