Skip to main content

July 8, 2021 | Human Resources | Posted by Ascentis Thought Leadership

Five Ways to Cut Labor Costs with Effective Business Systems

Labor is the number one expenditure for most businesses, accounting for 30% to 40% of many organizations’ annual budgets. The combination of employee wages (both hourly and salaried), benefits packages, overtime pay, paid time off and sick leave, employee wellness programs, and other labor-related expenses is an especially important consideration for a small business owner. Labor costing can make a huge difference for smaller employers where each salary makes up a larger percentage of the total budget. Fortunately, there are plenty of ways employers can use their existing workforce management software and business systems to reduce labor costs.

Coordinate Payroll and Scheduling

Too many small businesses let their schedules determine their payrolls, when in fact the two systems should closely inform each other. Adjusting payroll to reflect the hours employees worked each pay period often leads to adapting on the fly and spending extra hours adjusting figures and making corrections. By coordinating your labor costing with your scheduling, you can plan ahead and make sure that your payroll is an accurate reflection of your employees’ actual work schedule. This approach can also help you to identify inefficiencies and inconsistencies in both processes and make cost-saving corrections.

Increase Flexibility

Flexible scheduling has been pushed to the front of the workforce management conversation by the coronavirus pandemic, but it’s an idea with plenty of merit in any circumstance. Flexible scheduling can take different forms depending on your industry and your business. In some cases it may be a hybrid approach of remote and onsite work, with different groups of workers reporting to the workplace on different days. For other organizations, it may take the shape of rotating schedules, where different teams work different shifts from week to week. In both cases, employers can reduce the number of people onsite and the accordant amount of resources and expenditures.

Diversify Skills

Doing more with less is a fundamental principle of budgeting, and that applies to small business labor costing as much as it does anywhere else. Rather than making new hires to fill roles requiring specific technical or mechanical expertise, employers should look for ways to train existing employees in these areas. By cross-training employees with a robust learning management system, a business can potentially save major salary expenses. As an added bonus, offering new training and certifications helps your employees feel more engaged and empowered. And when workers do inevitably leave their roles, a cross-trained workforce ensures that someone else can step in and keep operations running seamlessly.

Schedule in Advance

Many expensive labor issues come down to lack of planning. Setting schedules on a weekly basis may seem like a way to stay nimble and adaptable, but in many cases it forces your HR team to operate in a reactionary mode, spending extra time and money trying to coordinate individual workers’ time off requests, training sessions, and other variables in the moment. Using workforce management software to set schedules a month or more in advance allows you extra time to identify potential conflicts, locate redundancies, and generally fine-tune the schedule to prevent problems before they get out of hand.

Communicate Strong Incentives

Sometimes the difference between an average worker and a highly productive one is just a matter of finding the right incentives. While salary boosts and expanded benefits offerings are probably the biggest potential motivators for most employees, there are also plenty of less expensive ways to incentivize your workforce. Setting up friendly competitions between employees — most parts assembled, longest time without an accident, best-organized workspace, etc. — including relatively inexpensive rewards like gift cards, after-work outings, or traveling trophies can be a surprisingly powerful motivator for many workers while reducing labor costs related to safety violations and low productivity.

Even better, these kinds of activities encourage team-building, employee engagement, and open lines of communication. Sometimes the root of a labor cost issue is a simple matter of communication. Without regular, two-way feedback sessions, it is all too easy for a worker to fall into bad habits, or for a pressing concern to go unaddressed. A strong performance review strategy that incorporates structured performance review sessions into your workers’ and managers’ regular schedules helps eliminate errors, improves time management, and ensures compliance.

Finding an effective, efficient labor costing solution can make a tremendous difference in the bottom line for small businesses. Investing in automated workforce management software can pay off in the long term by reducing labor costs and boosting productivity. Find out more about the ways Ascentis can help keep your costs lower and your schedules in order.

With more than 35 years of experience in providing Software as a Service (SaaS) solutions, Ascentis thought leaders have become a respected source for insights, tips, and innovations in the Human Capital Management (HCM) space.