Employee participation in budgeting: It refers to the process by which employees take control of their jobs and the conditions by adopting their participation in the budgeting processes within their work. Through this process, employees can share with decision-making authority concerning their roles and tasks with their supervisors.

Advantages

• Developing a stronger relationship: When setting a budget, the involvement of the employees in such processes makes them feel valued hence contributing more to such activities.
• Improving communication: Employee participation can also help improve communication where communication barriers are reduced. Thus, an employee with solid communication skills will effectively help simplify the setting of the company budget.
• Boosts Productivity: Employees who participate in the company activities help increase the company’s productivity. Thus, taking part in the decision-making processes within the budgeting committee boosts their decision-making capability and in the long-run productivity of the organization.
• Increased quality of products: in organizational operations, employee participation can help improve the quality of products produced by the company. Employees informed of the company’s direction may help the management make better budgeting decisions that benefit the company.

Disadvantages

• Time consuming Involving all employees in each department will mean that the negotiations may take too long before the staff reaches an agreement. If there is no agreement, the management will need to make the final decision, which means that the staff will need to accept an imposed decision.
• Budgetary slack The other limitation is budgetary slack. The employees may overestimate the costs and/or underestimate the revenue projections as a way of manipulating the budget to their advantage. It means that the subordinate managers will set targets that they are sure to achieve and even exceed in the next financial year.