5 Methods To Reduce Labour Costs


Having a full staff of employees is one of the largest costs for any company. While it’s true you need to pay for the best and brightest, there are some ways you can reduce your labor costs overall. Reducing costs in any way can help your company pull in more profit and build a better future. Here are five tips to help your company cut back on excessive labor expenses.

1. Focus on Employee Retention

Your first goal as an employer trying to reduce labor costs is to lower your employee turnover rate. Instead of constantly hiring new people to fill vacated positions, you should aim to keep the talent you have. Hiring new employees is much more expensive than keeping current employees productive and happy. Focus on providing training and development to current workers. Consider adding benefits and perks to your business to improve company morale.  

2. Outsource Some Projects

Another easy way you can control your labor costs is to take advantage of outsourcing. For some projects, you may need specialized skills or input from an outside person. Rather than go through the expense of hiring and training one individual for a specific project, look to an outsourcing firm. You can get your project on track and save money by partnering with a company that specializes in the skill you need.

3. Consider Working With Independent Contractors

Next, review your business model to see if any of your tasks can be completed by independent contractors instead of regular employees. If you have a project-based business model, this may work for your situation. Using independent contractors can help you save on employer tax contributions and health benefits. It’s typical for 1099 workers to pay their own employment taxes. Be careful that you don’t convert existing employees into contract workers. This can be considered a pay cut.

4. Understand Pay Data

It’s also important to have accurate information regarding pay rates for your business and the positions you have. When it’s time to hire a new person or negotiate a salary raise, research rates of pay before you have any negotiations. Understand the hiring cost per employee before you commit to adding to your team. Have a number in mind before you begin speaking with a new hire or existing employee.

5. Offer Flextime and Job Sharing

A final tip to help you reduce your labor costs could help your company attract more people who have families. If you have employees who are recent new parents, offer them part-time work, flexible hours, work from home options, or even job sharing. It’s tough for some people with families to balance the work and life commitments, but if you make it easier, you could help save on recruiting costs for a replacement. Some employers have been able to increase productivity this way as well.

Labor costs are always going to be a big part of any company’s budget, but you can control what you spend if you are knowledgeable and careful. Take time to review your current business model, salary packages, and more to get closer to a more efficient and profitable labor formula.




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