Running a business can cost beyond thousands of dollars.
Loans, debt and the scale of running a business can make the threat of failures potentially catastrophic to the business and one’s quality of life. With unending possibilities and the constraint of limited funds, scarcity becomes an issue. Therefore, learning how to optimise your funds can help to keep your business afloat and headed towards growth. There are many ways in which money can needlessly leak despite your best intentions, one of which is your spending on employees.
The following content gives you 5 simple tips to help maximise your funds by effectively reducing employee costs in your business.
Tips for Reducing Employee Costs
1. Reducing Employee Turnover
Employee turnover is a term used to describe the rate at which old employees leave and you need to hire more workers. Despite hourly wages, there’s much more that goes into gaining an established employee. You might find yourself begging one simple question:
How much does an employee REALLY cost?
The simple answer is; more than an hourly wage - That’s for sure. The acts of advertising/searching, scouring applications, checking references, interviewing, vetting criminal histories, credit checking, drug testing, training, etc. drain you of productivity, in a world where time is money.
Work-related stress is commonly seen as a primary motivating factor for quitting one’s job. With that in mind, here are some tips for reducing employee turnover:
- Give your employees space to work
- Allowing employees autonomy displays trust in them and their abilities. Space can empower workers to grow rather than confine them under the strict and perhaps intimidating rule of an overly watchful system. While not neglecting them, ensure them that they can come to you for guidance when they need it.
- Monitor the workload of your employees.
- Freedom is good but distancing yourself from your employees too much can allow them to get overloaded with work. Make sure you are watchful enough to know whether your employees have too much or too little work.
- Make sure that the work environment is adequate.
- A workplace that is too hold, cold, dark, bright, small, etc. can make working miserable for the employees. A comfortable employee is more willing to stay and work than one who dreads being in an inhospitable environment.
- Ensure job security among employees.
- Not knowing whether or not your job will be there for you will have an employee constantly surveying other options and having a Plan B escape route. Where possible, let employees know that their job is secure so they are more likely to stay.
- Have well-defined work roles.
- It is difficult to participate fully if the rules to the game are not clear. The same goes for the workplace. Knowing what your role is can eliminate crossover between involved parties and minimise conflict, reducing work-related stress.
- Show employees ways in which they can excel/progress while working for your business.
- Worker ambition can seem hard to come by and should often be encouraged because their drive can push your business to new horizons. If an employee perceives themself to be stuck in a dead-end situation, it can leave them looking for a way out. Adversely, showing them where the fruits of their labour can take them, may lead them to stay and work more purposefully.
2. Review Current Wages
Perhaps you are overpaying staff without even knowing. Money that is unknowingly embellishing the account balances of others should ideally be spent on developing the business as a professional organisation. Trying to do so can lead you through murky waters but if you have reporting software, this might make it easier to review the wages you’re paying. Good reporting software can provide you with the information you need when you need it. It can filter out unnecessary droves of information that clog your attention and consume your time, allowing you to gather precise information at will.
Having employee timesheet templates allow for fair and consistent tracking of work output and payment across employees. The plain numbers on the payroll can be deceiving and do not distinguish between salary and total employee benefits. Surveying employee payment using an employee cost calculator can help decipher the figures and give you an in-depth understanding of what exactly the money you are paying is going towards. This highlights the distinctions between wages; vehicle, phone, health, and other employee-related costs; saving scheme rate and more to show you the true cost of new and existing employees. Having an understanding of your business expenditure allows for more informed spending and potentially reduced employee costs.
3. Review Your Current Process
Is your current process working as efficiently as possible and NOT wasting time and money? The only way to know for sure is to check. Reviewing your current process can reveal inefficiencies or bottlenecks in staff that may be creating imbalances within your procedural operations. A bottleneck in one place may be working slowing your supply chain and consequently causing excess work that hinders the entire process.
Using an employee time tracking app can break down the work processes effectively. It acts as an employee hours tracker and effectively displays how much time is being spent on a particular task. With this information at your disposal, you can see which tasks took you longer than expected and differentiate between what is billable and what isn’t. As a result, can derive reasonable conclusions and investigate further into what is responsible for the trends you have discovered.
Perhaps an employee needs extra training, assistance or the process itself is fundamentally flawed. Now you can target resources to positively affect the situation, streamlining the process. Employees are a big part of operational processes and making sure that they are working as efficiently as possible ensures that the cost of having them is more worthwhile.
Money that is saved by successfully reviewing and correcting your current process gives you more resources at your disposal. Now that your current processes are well organized, you can operate with enough freedom and confidence to begin addressing other issues such as the automation or outsourcing of mindless and mundane work.
4. Automate or Outsource
Your employees have been hired to be specialists in what your business is designed to do. Therefore, tasks that could be done by others eat up time and rob you of productivity. They have little to do with your business.
Often these tasks may be automated or outsourced to less expensive service providers. This could include the evolution of tasks such as cleaning, outsourcing work to a company specializing in cleaning and maintenance; advertising, outsourcing and automating sharing advertising material online; order taking, cut out middlemen by automating and allowing consumers to place orders electronically; product distribution, automating and selling stock online; the movement of stock, outsourcing to companies designed to transport cargo; customer service, outsourcing to a call centre; or low-level employment, outsourcing to a recruitment agency to compile and manage applicants.
You pay your employees a wage that should be maximised by their output from their specialised skillsets. The skills that you’re paying for should reflect the reality of your operations. Relying on processes outside of your own staff can secure time for their own work and bring in skills and/or streamlined procedures to raise efficiency and reduce employee costs in your own business.
5. Hire Independent Contractors or Casual Staff
Workloads can fluctuate. There may be times when all is manageable and other times when you may be wishing that you had a few extra hands available to get the job done. Independent contractors or casual staff offer periodical relief in uncharacteristic times when demand ceases to be satisfied.
Having access to workers who are available at specific intervals can get the job done without burning cash on unnecessary wages. Independent contractors and casual staff are only paid for the work that they do, appear at your discretion and don’t need the same entitlements as those working full-time or part-time. Regular staff also have contracted hours that are to be upheld, with casual staff and independent contractors this is not the case. There is seemingly no point in hiring extra full-time or part-time staff to ease the burden during peak periods as they will linger throughout the rest of the year and require extra benefits. When the workload is back to normal, independent contractors and casual staff can be pardoned of their duties restoring the workplace back to business as usual.
Deciding whether or to seek assistance from outsourced employees such as independent contractors or casual staff can be complicated.
There are multiple ways in which you can effectively reduce employee costs in your business which have been covered in this article. Firstly, reducing employee turnover eliminates needless spending on the recruitment and training process. It is often due to work-related stress so lowering avoidable stress can foster positive traits like loyalty and enthusiasm, increasing retention of staff. Reviewing current wages highlights the overpaying of employees, money that could be spent elsewhere and contributing more to the business. Evaluation of current processes using employee time tracking apps can highlight bottlenecks that stop your business from operating in the most efficient manner and allow you to allocate resources accordingly. Automating and outsourcing mundane work allows you to ameliorate the money spent on your employees’ skills in tasks that are more tailored to your business. Lastly, hiring independent contractors or casual staff can offer assistance in times of high demand while not requiring the contracted hours or entitlements that are essential for full-time and part-time employees.