Without a doubt, the cost of labor is the single largest expense for most businesses. The employees you keep end up costing more than the base hourly wage or salary you’re paying them, due to taxes and insurance, but a business can’t run without the people who make the work happen. Take a look back at how your business fared this spring. Does your profit margin need a boost? If so, perhaps you’re considering your options. You could lay off a few employees, but you know that will decrease morale and constrict your ability to effectively serve your customers. But there are alternatives. Here are a few of the best ways you can reduce your labor costs without handing out pink slips.
Best Ways To Reduce Labor Costs In Your Business
Focus on productivity
Get the most out of your workers’ time by making productivity a priority. For field workers, arrange routes that minimize driving time by scheduling customers in the same area on the same days. You should also consider upgrading your technology or materials so your workers can do more in less time. For example, the use of a mulching mower removes the need to bag grass clippings, saving time on the job. Slow-release fertilizers reduce the necessary frequency of fertilizing, meaning you make less trips. You could even consider applying pre-emergent herbicides to eliminate or minimize weed growth before it necessitates a return visit. Don’t forget about your office staff, too. Would they work faster and more efficiently with a newer phone system or scheduling software? These types of productivity boosters cost money up front, but you’ll see the returns in employee output.
Cut down on overtime
During the spring rush, do you find you are often paying overtime in order to serve all your customers in a timely fashion? Cut down on overtime costs by planning ahead. For example, if you know you’re going to be exceptionally busy for just a few weeks, consider hiring a temporary or contract worker to help pick up the slack. Even though an additional person is an additional expense, it can actually be more cost-efficient than giving your existing crews overtime pay. You don’t need to provide insurance benefits to temporary or contract workers, and they are used to jumping quickly into a job. Just make sure you are following the government’s rules when it comes to bringing on these types of employees—you can’t hire out your year-round workforce in this way.
Reduce employee turnover
Employee turnover costs more than you might imagine. You’re not just swapping one employee out for another—you must put time, money, and other employee’s resources into recruiting, selecting, and training the new employee. It’s understandable to lose an employee here or there, but high rates of turnover can lead to less loyalty and productivity from your remaining employees, because they don’t feel their jobs are stable. Talk frankly with the employees who are leaving to find out why you’re seeing high rates of turnover and work to fix employee engagement.
Call up your insurance providers
If it’s been a while since you talked to your insurance agent(s), it might be worthwhile to give them a call. Health, vision, dental, life—all the different types of insurance options you provide your employees as part of their benefits package turn into a hefty chunk of labor costs. If you’ve recently added more vehicles or people to your plan, you might be able to get a volume discount. Or, you could change the terms of the plan slightly to bring the cost down (say, by providing plans with slightly higher premiums or deductibles). If your insurance company keeps skyrocketing costs, don’t settle: Check out what their competitors are offering. Finally, don’t forget about auto insurance. If you’re not currently using some of your trucks, make sure you cancel the insurance on them.
Slow down wage growth
Wages generally move upwards every year, but if you’re in a sticky situation you might need to hold off on raises for a bit. Review your compensation packages to make sure they are in line with current trends. If you’re above trend or on track you can consider delaying raises, or only making token raises, until business is looking better. Just don’t do this for too long or you risk discouraging employees. Let your employees know that this is happening across the board and that it’s only temporary; many will understand that a lost raise or small increase is better than people losing their jobs.
Don’t forget about the little things
- Using uniforms? Consider instead a dress code instead that gives your team a coherent look without breaking the bank.
- Want to cut down on overhead? Ask your administrative staff for suggestions on how they could eliminate or reduce unnecessary or overblown expenses in their department.
- Are you paying for non-business use of equipment? Monitor personal use of company vehicles and other resources.
- Do your workers really need their company cell phones? Consider decreasing the number of phones, especially if your crew members can share while on the field.
The decision to make cuts in any part of your business is never an easy one to make. But if you’re feeling the strain, use these tips to reduce your labor costs without the need to let go of workers. Employees generally react more positively to these types of setbacks than a layoff, and the cost savings can really help you out when business is tough.
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