The HR Budget Trap: How to Spot (and Stop) Wasted Spend

Year after year, well-intentioned HR budgets leak value through hidden cracks: unused subscriptions, redundant processes, poorly structured benefits, and tech sprawl that siphons dollars without lifting performance.

The result? HR spend rises even as strategic impact stalls. And according to SHRM, HR costs per employee have more than doubled between 2022 and 2025, reaching a median of $2,479 per FTE.

If HR wants to be seen as a value creator, rather than a cost creator, we need to become forensic in how we monitor, manage and optimize our spending.

Leak #1: Redundant or Under-Used HR Tech

It may come as a shock to no one to hear that HR tech budgets are growing: in 2025, 55% of companies increased their HR tech spend as they chase visibility, automation and insights. But tech stacks without discipline quickly become a swamp of overlapping systems and unused modules.

A recent industry analysis suggests that many organizations end up paying for multiple systems that handle the same basic functions, driving up costs while lowering efficiency. Combine this with the HR software sprawl (with the average business using six different HR tech providers) and suddenly half your tech investment is duplicative and redundant.

What to do: Conduct an annual technology audit. Map each tool to a clear business outcome, measure adoption and remove or consolidate anything not delivering measurable value.

Leak #2: Under-Utilized Benefits

Employee benefits can make up roughly 20-30% of total payroll costs, but a surprising 20-40% of those benefits go unclaimed. That’s millions of dollars in mid-sized organizations that never touches employees that could instead fund targeted development programs, retention incentives, or cost-effective wellbeing interventions.

What to do: Utilization rates should be actively tracked for each benefit so that HR can get a real sense of which benefits are valuable and which are falling flat. A benefits survey combined with utilization data can reveal where spend is wasted and where reallocation can yield higher engagement.

Leak #3: Manual, Redundant Processes

Many HR teams still spend hours on manual work, such as onboarding paperwork, compliance checks and data reconciliation. These activities silently inflate personnel cost and create the space to invite error.

What to do: Standardize and automate processes wherever possible. Invest in workflow tools that reduce manual effort and free your HR team for strategic work like talent development and leadership enablement, as their skills and expertise will go to much better use here!

Leak #4: Poorly Structured Policies and Redundant Services

Outdated or inconsistent HR policies often fall into the trap of duplicating what other departments are already doing or fail to align with organizational goals. A lack of clarity here can lead to overspend on perks nobody uses and confusion that undermines trust.

What to do: Review policies for alignment with your current business strategy and eliminate redundancy to ensure consistent application across teams.

HR budgets don’t have to be a black hole. With clear audits, data-driven decisions, and the right external expertise, HR can successfully spot the leaks, stop the waste and invest instead in what truly drives performance, experience and organizational success. If you would like to discuss how we can help leak-proof your budget this business year, please do get in touch with us today!