How to Reduce Labor Cost in Your Business

Business person computing using a calculatorPeople are the number one asset in any business. They also happen to be one of the largest expenses. Fortunately, there are ways to cut back some of the cost without adversely affecting business processes. Here are some ways.


Some tasks, although critical to the smooth operation of your business, are better left to third-party service providers, especially if it does not warrant paying the salary of a full-time staff. For instance, instead of hiring a certified public accountant or an IT specialist, your organization could benefit if you retain the services of an accounting firm or a company offering IT services in Austin instead. Not only will you save on salary, but you can also focus on your core business and leave the other tasks to experts.

Minimize Employee Turnover

Recruiting the right people can involve a massive drain on resources and manpower. You will have to spend on the salary of people involved in the recruitment and training of employees. To eliminate this part of operation cost, you need to invest to keep a stable of key people. Not only will this translate to lower labor cost, but it will also boost company morale, ensure high-quality output, and hasten production timelines.

Cross-Train Existing Employees

Although specialists command a higher salary for their masterful skills, flexibility can prove to be more valuable in today’s very dynamic and highly innovative business landscape. Thus, it would be in you and your people’s interest that they are trained with other skill sets as well. This way, absences and resignations do not hamper your organization’s processes. In short, this practice improves productivity while saving on labor cost.

Automate Tasks

Advanced technology is now at your disposal. Take advantage of that by automating some operations. You could probably start with repetitive, non-critical tasks and gradually move to important operations as you become more confident of automation software available for your type of business. For instance, you can reduce the number of people manning the telephone lines by installing an interactive voice response system.

Reduce Overhead With Telecommuting

Woman working at her homeTelecommuting can help your bottom line in so many levels. First, you get to save on overhead cost by allowing your employees to work at home. Less office space, reduced utility bill, and office supplies. More importantly, studies show that more and more people are happy to be working from home, saving them commute time and gas money to get to the office. And happy employees mean fewer absences and lower attrition rate. It is a win-win on so many fronts.

Mind the Overtime Hours

There will be crucial times when employees have to work overtime to meet deadlines and production numbers. However, you need to treat this as a last resort rather than a company culture. Paying employees 1.5 times their hourly salary for tasks that are not that necessary or urgent is not only a drain on company resources but a complete waste of your people’s time as well.

Cutting back on labor cost does not mean you have to take drastic actions. You can work out a plan to slowly adapt to automation, telecommuting, and some other practices to ensure that these will not disrupt major processes and outputs.

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