5 strategies to cut labour costs without impeding your business’s successMunira Rangwala
If you're a business owner, you'll attest to the fact that salaries and wages are one of the largest costs for companies. Although labour and employee salaries are a significant expense for businesses, they are crucial for the success of the company. If you fire employees to reduce costs, your employees will invariably suffer from poor morale. Thankfully, there are ways to reduce labour costs and keep your company's head above the water.
Here are five tips to help you keep your business growing and successful while cutting labour costs at the same time:
Review your pay schedules
Even though financial markets undergo rise and fall, salaries and wages move only in the upward direction. Review your level of compensation for each employee in your company to ensure their compensation level is in line with the current trends. If your current employees are earning more than what other companies in your industry would pay them for their job, delay or make only token raises till your payroll is aligned with the current compensation trends.
Hire interns or temporary help
Every business witnesses peak periods of production at one point or another. A retail specialty store may need more employees during the year-end holidays. A designer business may need extra help to produce summer styles. When you feel that your business is going to need more hands on-board, you can look at hiring interns or temporary agencies instead of full-time employees to reduce labour costs.
Reduce employee turnover
Does your company have significant employee turnover every year? If yes, it is likely that a sizeable chunk of your business's money is being used to pay for the salaries of your company's HR personnel as they engage in recruitment, selection, and training of new employees. The indirect and invisible costs for the same are poor quality, frequent oversight, lengthy production time, and even fraud, since your employees view their time in your company as temporary.
Technology, when used efficiently, can help you cut labour costs to a certain extent. Computers can automate several tasks and greatly reduce production time and costs. Even simple computer software has the ability to enhance and improve project management so that more gets done with less labour. To put it simply, computer technology can handle more duties, is user-friendly, and relatively inexpensive.
Make way for commissions
If you cannot afford to pay employees fixed salaries month after month, make way for a new financial model where money is only paid when there is accompanying revenue. Replace full-time employees with freelancers who work on a commission basis. For instance, instead of hiring salaried salesmen and pay a high commission rate to only those individuals who make successful sales.
Instead of treating your employees as a burden, consider them to be your biggest strength. Use the above-mentioned five tips to significantly reduce labour costs in your business.