While employees are undoubtedly one of the most important resources within any organisation, they are also one of the most expensive assets you will have to manage. Particularly as National Minimum Wage rates increase, employee costs can grow rapidly and making sure that you are managing these costs effectively is key to operating successfully.
Employee costs include things like wages and salaries, bonuses, expenses and overtime, as well as any costs involved in recruiting for the workforce. These costs can add up significantly, so whether you are already concerned about employee costs or are long overdue for a review of your spending, make sure that you consider whether you are meeting the following criteria for effectively managing employee costs.
Recruit Sustainably
The costs incurred by an employee begin long before they start working for your company. The recruitment process can be very expensive as you will need to factor in the cost involved in advertising a position, as well as the time you will need to dedicate to the interview process. Even once you have found the perfect candidate, you will need to invest in their training and development before they can be expected to perform at their very best. With all of these recruitment costs adding up, it’s important to recruit sustainably.
If somebody leaves the company, consider whether they really need to be replaced straight away. If you do need to hire, make sure that you do your research and find out what the average pay for that position is. You might find that you have been overpaying for years and could make significant savings to your employee costs.
Prioritise Employee Retention
Unhappy employees are expensive. If employees feel undervalued, turnover will be high, productivity will be low, and both of these metrics can be very costly for your business. Though it might sound counterintuitive if you are trying to reduce employee costs, make sure that you pay your good staff a competitive wage and offer regular salary increases where appropriate. Employees that know they are valued are much more likely to stick around and carry out their work to a high standard which will inevitably help you reduce your employee costs in the long run.
Review Benefits Packages
Benefits packages are a valuable tool for employers, making your business more attractive to prospective job candidates and providing another way for you to show your employees that they are valued. However, benefits packages are also one of the biggest employee costs and are a good place to look if you are trying to manage costs more effectively.
Cutting employee benefits entirely should be avoided unless absolutely necessary as it will send a negative message to your workforce. However, there may be benefits that you are offering that are unnecessary and cutting these can help you make significant savings on employee costs. Get feedback from your workforce on the benefits package and find out which benefits your employees actually value. You may find that you can reduce employee costs significantly by cutting back on things they are not bothered about, like free office snacks, while retaining benefits that are actually used and cost-effective, such as health insurance and eye tests.
Track Time Carefully
Staff wages make up a large proportion of employee costs, so make sure that you are actually paying your employees for the right time. Keep a close eye on the amount of hours worked by each employee and ensure that timesheets are as accurate as possible to avoid paying out unnecessarily.
If you allow employees to work paid overtime, only approve this when it is actually necessary. You should also take measures to help employees be as productive as possible during the time that you are paying them for. Invest in suitable equipment so that they can carry out their role efficiently and you get the most out of money spent on paying staff.
Consider Casual Staff
If you operate in an industry that changes quickly or experiences seasonal demand, consider hiring casual staff or contractors. You may find that the workload is manageable most of the time but there are a few months of the year or big projects that require some extra hands. Employing casual staff can help you to reduce your employee costs as they require less long-term investment and tend not to qualify for benefits packages. Depending on the type of contract you use, you can also adjust their hours flexibly and therefore do not have to commit to costs that are not sustainable.
By following these tops tips, you can consider ways to effectively manage your employee costs and reduce them if necessary. If you are concerned about your employee costs and need further guidance or do not know where to start if you need to quickly cut back, make sure that you get in touch with experts straight away. Get in touch with the friendly and experienced advisers at Ballard Business Recovery to discuss your business and the possible cost-saving measures you could make.
