What is Human Resource Planning? (AQA A Level Business): Revision Note

The purpose of human resource planning

• Human resource (HR) planning is the process of analysing a business's current workforce and forecasting what it will need in the future, then putting strategies in place to close the gap between the two

• It involves asking:

  • What people does the business have now?

  • What people will it need?

  • What actions are required to get there?

• HR planning is an ongoing process that must be reviewed regularly as business strategy and external conditions change

The HR flow

Recruitment

• HR planning identifies when new employees are needed, how many to hire and what skills they should have

• Proactive recruitment avoids filling vacancies at short notice, which often leads to rushed decisions and higher costs

Example

A technology company planning to launch a new product in 18 months uses HR planning to begin recruiting developers straight away, giving enough time to find the right candidates before the critical development phase begins

Training

• HR planning identifies skills gaps – areas where current employees do not yet have the abilities the business will need in the future

  • This allows the business to plan training programmes well in advance rather than discovering gaps too late to address them

• Training identified through HR planning may include:

  • Technical skills for new equipment or systems

  • Management development for employees being prepared for more senior roles

  • Compliance training required by new legislation

Example

A logistics company planning to switch its fleet to electric vehicles identifies that mechanics lack the skills to service electric engines, and begins funding training a year before the fleet change takes place

Redeployment

• Redeployment means moving employees from declining areas of the business into different roles elsewhere, rather than making them redundant

  • This benefits the business by retaining experienced staff

  • It also benefits employees by allowing them to keep their jobs and develop new skills

Example

A bank reducing its branch network as customers move to online banking uses HR planning to retrain branch staff for digital customer service roles, avoiding large-scale redundancies

Redundancy

• Redundancy is the dismissal of employees because their role is no longer needed, typically due to changes in the business such as restructuring, falling demand or the introduction of new technology

• HR planning ensures redundancies are managed fairly, legally and with adequate notice

• Early identification allows the business to:

  • Explore alternatives to compulsory redundancy, such as voluntary redundancy or reduced hours

  • Consult with affected employees in line with legal requirements

  • Provide support and retraining for those leaving

  • Minimise disruption to ongoing operations

Retention

• Employee retention refers to a business's ability to keep its staff over time

• Retaining staff matters because replacing an employee is expensive

  • Costs include advertising, recruitment, onboarding and the lost productivity while a new employee gets up to speed

  • High employee turnover also disrupts teams, reduces institutional knowledge and can damage morale among those who remain

• HR's goal is to ensure that employees who are performing well have no reason to look elsewhere

• To improve retention, HR teams focus on a range of strategies including

  • Competitive pay and benefits

  • Clear career progression pathways

  • Flexible working arrangements

  • Investment in training and development

  • Creating a positive workplace culture where employees feel valued and heard

The value of human resource planning

• Effective HR planning is beneficial for several reasons

• It reduces costs

  • Proactive planning helps avoid costly last-minute hiring, reduces employee turnover and prevents the business from having too many or too few employees

• It supports strategy delivery

  • It ensures the business has the people it needs to carry out its plans, rather than being held back by workforce shortages or skills gaps at critical moments

• It improves employees' experiences

  • Employees in well-planned organisations are more likely to receive appropriate development, feel secure in their roles and see clear progression opportunities

• It reduces risk

  • Planning ahead means the business is less likely to be caught off guard by changes it could have anticipated, such as retirements of key staff

• It ensures a business is legally compliant

  • Structured planning helps the business meet its obligations under employment law, particularly around redundancy, equality and working hours

Influences on human resource planning

The current workforce

• Before planning for the future, a business must understand what it currently has

  • Skills and qualifications

    • What can existing employees do, and where are the gaps?

  • Age profile

    • A workforce with many older employees is a sign of upcoming retirements

    • A younger workforce may lack experience

  • Employee turnover rates

    • High employee turnover in particular roles highlights retention problems that must be considered in future recruitment plans

  • Performance levels

    • Identifying high performers and those who require development informs both training plans and succession decisions

Example

A manufacturing firm finds that 40% of its skilled machinists are over 55, which prompts it to draw up a recruitment and training plan to develop the next generation of skilled workers before a critical shortage develops

Future human resource needs

• HR planning must reflect a clear picture of what the business will need from its workforce going forward:

• Business strategy

  • Expansion requires more staff

  • Cost reduction may require fewer

  • New products or services often require new skills

• Planned operational changes

  • Introducing new technology, relocating, entering new markets or restructuring the business can all increase or decrease the number and type of staff needed

• Legislative changes

  • New laws may mean the business needs staff with specialist knowledge, or that existing employees need to work differently

• Anticipated departures

  • By anticipating retirements and other expected departures, the business can plan ahead for who will fill those roles

Skills and numbers gaps

• A numbers gap occurs when the business expects to have too few or too many employees relative to future requirements

  • Too few employees means recruitment or redeployment activity is needed

  • Too many employees may require redundancy or retraining programmes

• A skills gap occurs when the business has enough people but they lack the capabilities required

  • This informs training and development planning or targeted external recruitment

Example

A digital marketing agency finds that only eight of its 40 staff have expertise in social media and data analytics, areas central to its three-year strategy

This skills gap leads it to launch a major training programme and a focused recruitment plan targeting digital specialists

The labour market

• The labour market is the pool of available workers and the conditions in which businesses compete for them

Example

A cybersecurity company planning to recruit 20 specialist analysts discovers that salaries for these roles are rising 15% per year

Rather than competing in an expensive open market, it establishes a graduate training scheme and university partnerships to develop its own talent at a lower long-term cost