How to cut costs and still keep your business strong.
Nobody ever wants to face the prospect of making redundancies in their workforce.
However, in the wake of the COVID-19 pandemic, this possibility looms over more and more HR departments. At times when budgets are particularly stretched, dramatic action like redundancies and restructuring may seem like the only option. But often making smaller changes across the board may be enough to avoid the loss of talented workers and the reputational costs of widescale redundancies or restructuring.
By taking small steps to curb costs, HR leaders may find departmental budgets stretch a lot further. Some of these streamlining steps could actually improve an organization’s operational running. And while other steps – such as cutting salaries – will certainly be less popular, employees may well appreciate this as an alternative to losing valuable team members – or losing their own jobs – to redundancy.
Think work/life balance
How about turning a negative into a positive? If you’ve read our post, Is Salary Intelligence Everything?, you’ll know that most employees are more motivated by work-life balance than they are by money. As Crain’s New York Business explains, the 35-hour work week has proved hugely popular across Asia and in many European countries. Instead of cutting jobs, this means all employees taking a small pay cut in return for precious time back to devote to life outside work.
As you can find out in our blog Has your company’s work-life balance dropped off the scales?, improving work/life balance invariably increases workforce morale productivity, so you may not miss those extra hours as much as you think. Even so, Crain goes a step further to suggest replacing full-time workers who leave the organization with part-time or contract workers to further save money. As employees increasingly value work-life balance, increasing part-time opportunities could also be a welcome change for many prospective candidates.
Reduced risk = reduced cost
The Harvard Business Review estimates reducing significant risk — including employee accidents and office theft — could save businesses up to $85 billion. Worth giving your risk assessment a second look, maybe?
Revisit Salary Levels
So, this is not a popular one, but sometimes there is just no getting away from it. If you start by using our Market Intelligence services to review your current salary levels compared to the rest of the market, this may answer the question of whether or not this is the place you need to trim down expenses. Let’s put it this way – if you continue to drastically overpay one class of employees, this may come at the cost of another group of employees’ actual jobs.
Price New Health Care Providers
Shopping around to compare plan costs is just one option. Investigating inventive solutions that might reduce overall program expense — and possibly also reduce employee premiums — can have a surprising effect. For example, combining direct primary care — a system in which physicians charge a fixed monthly fee for care, instead of billing insurance providers for each visit — with a high-deductible plan can sometimes save a company 12 to 15 percent, compared to conventional health insurance, according to CNBC. Human resource professional social networking and resource site HR.com also suggests re-examining who you’re covering and contemplating major cost-saving changes, if necessary, such as potentially eliminating dental and vision plans.
Consider Outsourcing Services
Nearly 6 out of 10 organizations have moved some in-house HR functions to an external service provider, according to the Society for Human Resource Management’s “Human Resource Outsourcing” study. The global membership organization’s research found that operation cost reduction was one of the most common reasons for outsourcing HR functions; 31 percent of organizations said it had helped them attain a cost savings.
If you’re trying to determine what HR cost cuts to make, consider involving workers in the decision — which can encourage employee buy-in, instead of selling the change as a management mandate.
If you involve employees, the Society for Human Resource Management says it’s important to manage expectations so employees don’t end up feeling like their contributions were ignored, which can damage morale.
For tips on handling employee input, check out HR Magazine’s “Involve Your Employees in Cost Cutting” article.