HomeHR glossaryZero-based budgeting (ZBB)
Zero-based budgeting (ZBB)

Zero-based budgeting (ZBB) is a financial management approach used in human resources to create budgets from scratch, starting at zero dollars and requiring justification for every expense, rather than using the prior year's budget as a baseline. It involves a thorough review of all HR activities and expenditures, forcing HR departments to assess and prioritize their needs, which can lead to increased efficiency and cost control.

A company implementing ZBB would require HR managers to justify all expenses, even for recurring activities like employee training. Instead of assuming a fixed budget for training based on the previous year, HR managers would need to build the budget from zero, considering factors like employee development needs, training methods, and costs associated with each training program. This approach ensures that HR spending aligns closely with the company's current goals and objectives, promoting accountability and resource optimization.

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