In some industries, labor costs account to up to 40% of a business’ total expenditures.
Are you looking to improve your margins, build your bottom line and improve efficiencies in your workplace? Start by reducing your cost of labor.
Easy to say but challenging to implement, this concept is critical for the future-focused business leader to master.
Today, we’re sharing a few ways you can reduce labor expenses while maintaining workforce morale and keeping productivity levels high.
Ready to learn more? Let’s get into it.
1. Review Salaries
Begin by tackling the most obvious step first. Take a look at the current salaries on your payroll.
Are your compensation levels in line with current trends? Or, are they merely based on historical data? Review what each role should earn based on recent market patterns and make adjustments from there.
Until your numbers align, let employees know that there may be delays to their expected raises. You can also encourage them to acquire new skills and certifications to make their positions as valuable as possible.
2. Maintain Your Workforce
Are your employee turnover rates through the roof? If so, your labor costs are, too.
Instead of paying HR employees to recruit, select, train and onboard new employees at a breakneck speed, funnel these resources back into your small business instead.
Moreover, the time spent on this effort also reduces the productivity levels of your staff. Refocus their efforts toward maintaining a stable workplace core, instead.
3. Cross-Train Your Teams
A cost-effective workforce is one that is cross-trained in a variety of specialties. While having a few specialists on your staff can make your team valuable, it also reduces your ability to bounce back should that employee leave your business.
Instead, empower your personnel to pursue advanced training so they can perform a variety of operations. This way, even if your structure changes, you’ll still be able to turn a profit.
4. Convert Salaries into Commissions
In some instances, it may make sense to convert a worker’s annual salary into a commission-based one.
For example, your salespeople may be willing to accept a high commission fee, even if there is more risk involved. Or, an on-site technician might work on a contractual basis if you can forecast steady work.
5. Automate and Outsource Where You Can
Are you still paying employees to perform time-intensive manual tasks such as invoicing or customer relationship management? Instead, invest in third-party providers who can handle the job in a fraction of the time.
Or, determine where you can convert these processes into automated solutions. For instance, a pay stubs maker can make payroll a breeze.
Reduce Your Cost of Labor Today
Now that you know more about how to lower your cost of labor, are you ready to make smarter financial moves for your company?
If so, you’ve come to the right place.
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