Human Resource Planning is the most vital part of HR. In this process a complete study of the existing personnel resources and the resources that are likely to be required in the future is done. There are several demerits of both over and under staffing. With Over staffing the company loses in the form of excessive salaries and under utilization of skills. When under staffing is resorted to, the company loses customers, orders, profits economies of specialization and scale. HR Planning involves the devising of appropriate strategies for matching the requirements of the staff and the available vacant positions.

Planning and forecasting

The HR department must make planning and forecasting a very religious exercise. For this an evaluation and contrast of the past and future is made. Today’s needs and resources vis-a-vis tomorrow’s are studied.
For instance, if the organization makes shirts and the present demand is one hundred shirts, and in the event that the demand goes up by one hundred and fifty percent, the manpower and resources required to meet the demand is studied. The company needs to analyze whether they could function with the same staff by increasing machinery or whether they need to increase staff. The most profitable trade-off is chosen.

Job Recruitment

The HR department defines the job requirements. The defined requirements are then tabulated. These are skill set that the chosen candidate is required to possess. Then the HR department starts recruiting. The HR decides whether to fill in vacancies with internal candidates or call them from outside. The shortlisted candidates are then tested gruelingly. These tests are usually one or a combination of – personal interviews, written tests, group discussions and reviewing of past credentials. The companies more often than not follow a step by step elimination process, i.e., a candidate who passes step 1 progresses to step 2.

Planning for vacancies and contingencies

The work of the HR department doesn't end with choosing the right candidate; his/her replacement also needs to be thought off. There could be promotions, terminations, retirements, inter and intra company transfers. Also the present staff might leave in lieu of better opportunities outside. The demand and production might go up considerably resulting in demand for extra personnel. All these factors need to be diligently taken into consideration. Again the planning for future vacancies starts.