If you’ve ever looked at your company’s expenses, you’d see that your payroll is one of your largest. While that’s natural in every business, sometimes this can be uncomfortably high. As a way to increase profits, you’ll want to keep your costs relatively low, but you wouldn’t be in a position to get rid of your workforce.
You’ll need to find ways to manage your employee costs without negatively affecting your company. Thankfully, there are multiple ways you can do this, but it’ll take a bit of creativity and some adjustments in your strategy. Five unique ways to manage employee costs can be recommended.
Not only will they be practical, they’ll have a noticeable impact on your expenses, while making sure everything’s being done the way it should be.
Benefits Of Managing Employee Costs
Before diving into the various ways to manage employee costs, it’s worth diving into why you should do so. An increase in profits is the most obvious of these, but it’s far from the only one. Instead, there are multiple others, such as:
- Investment – The money you save when reducing employee costs can be reinvested back into your business to improve it. Expanding, getting new equipment, and other factors can all be much more within your reach than they otherwise would have been.
- Savings – Every business needs some kind of financial cushion for when things aren’t going as well as they should be. By reducing your employee costs, you can create and start adding to that cushion and keep it for a rainy day. Managing other costs can also play into this.
With the benefits managing your worker expenses offer, it’s natural to want to take advantage of it. You’ll have to use the right ways to manage employee costs to do this, however. Going about it the wrong way could end up decreasing productivity and negatively impacting your company.
Five top ways to manage these costs stand out, as they’ll have a positive impact on your company.
Ways To Manage Employee Costs: 5 Unique Options
1. Reduce Working Days
Reducing the number of working days your employees have can be a great way of reducing your employee costs. Having an extra day a week where you’re closed could be an option, but that’ll mean not generating any revenue for that particular day. It’ll also mean a reduction in productivity.
Depending on the industry you’re in, having a shorter work week mightn’t have too large of an impact on your revenue, provided there’s an increase in daily output. Four ten-hour days could be just as productive as five eight-hour days.
It’s the same number of work hours, but gives your employees an extra day off a week. They may be willing to accept a slight pay cut in exchange for having that time off, making it worth considering.
2. Hire Part-Time
Part-time employees can be much more appealing than full-time ones for various reasons. They naturally wouldn’t command as high a paycheck because of the lower hours. At the same time, they mightn’t be eligible for the same type of employee benefits your full-time employees are.
That saves you a significant amount on employee-related expenses. Even choosing temporary staff – ones that are only there for a short, set amount of time – can be a great alternative to hiring full-time employees year-round. It’ll save you a small fortune in payroll.
3. Get Experienced Managers
How you manage your employees plays a significant role in your costs. Having too much staff on hand at any one time is an expensive mistake, while too few employees means work won’t get done like it should. Having the right management in place can be a great way of making sure neither of these happen.
Whether it’s a field services company, human resources firm, or simply an exceptional in-house management team, there are multiple ways you can prevent this. Making sure you’ve the right people in place to look after your employees and the related expenses ensures everything’s sustainable and within guidelines.
It’ll prevent you from paying for employees to sit there with no work to do.
4. Work With Freelancers
In-house employees aren’t the only ones you could consider hiring. Freelancers are another option you mightn’t have even thought of. These are third-party employees you hire to perform certain duties. In many cases, they’re much more affordable than having traditional employees.
You wouldn’t need to worry about training costs, social security, and other expenses when hiring these freelancers. That drastically drops your employee costs more than you’d expect, and you’ll save in multiple ways while still getting work done to a high standard.
Though you’ll still want to have some in-house staff, you can use freelancers for marketing, sales, customer service, and much more. It’s one of the more practical ways to manage employee costs in the short- and long-term.
5. Review Compensation Plans
Salaries tend to increase as time goes on. Your employees will get raises, and promotions come with larger paychecks. That doesn’t always mean you’re paying employees what you should be. Review your compensation plans to see if you are. If you’re paying above-market trends, it’s worth considering putting a pay freeze in place, especially if you’re quite high above market.
While this mightn’t be the most well-received way to manage employee costs, it’ll be one of the more effective long-term solutions. To counteract the ill-will this might generate, consider offering some symbolic increases. Even tying some of your employees’ salaries to their performance could be a good compromise.
Ways To Manage Employee Costs: Wrapping Up
Finding ways to manage employee costs is essential to generating a profit in your business. You’ll need to strike a fine balance between having enough workers and paying through the roof for them. For many entrepreneurs, that can be a difficult thing to do. It’s far from impossible, however.
It’s a matter of knowing the right strategies and following through on them. Reducing working days, hiring freelancers, and using part-time workers can all be parts of this. While that means making a few adjustments, the benefits that managing employee costs offers are more than worth it.
