10 ways to reduce labour costs

One of the highest costs in business is labour. While your business is growing, it can be easy to justify labour costs to keep up with demand. But as business matures, sales level off and it’s not long before labour costs get out of hand, causing considerable strain on your business.

At this point lot of business owners and managers quickly turn to reducing staff numbers to curb costs. But rather than simply cutting staff, there are a variety of better ways to reduce labour costs and improve efficiency before you downsize your workforce. Here are 10 ways to do just that.

#1 Avoid overtime

The first way to improve your efficiency in labour costs, is to avoid overtime. A little overtime here and there may not seem like a lot, but even small amounts on a regular basis, with a larger workforce can quickly add up.

With pay increasing at rates like 1.5 to 2 times the regular pay, it’s important that you take overtime rates into consideration, minimising its impact on your business.

Effective rostering helps you to schedule and manage your resources so that excessive overtime can be avoided. Humanforce’s Rosters & Scheduling solution helps you optimise how your workforce is being utilised and can help you work within budgets and Awards/Employment Agreement conditions across one or many locations.

Read more about rotating rosters and whether these can help your organisation in our blog.

Effective rostering is all about balancing the needs of workers with the needs of the organisation, so that the right person with the right qualifications can be in the right place at the right time – and is eventually being paid the right amount. Happier, healthier employees are generally more productive and provide better customer service – so it’s the ultimate win-win.

#2 Streamline processes

Like overtime, small changes to streamline processes can build up to make a significant difference. The aim of your business (at least in terms of how processes are concerned) is to become a well-oiled machine, most effective at achieving its outcome.

If someone is completing a task more than twice, or multiple people are undertaking the same task, it needs to be put in writing so that it’s developed as a process and there are clear lines of responsibility and management.

This doesn’t mean people have to be micromanaged, but too many business owners and managers try and handle everything themselves, wasting time on less important tasks, manual methods and juggling competing priorities.

Staff end up wasting time on repeating tasks unnecessarily, and time gets taken away from more important tasks that actually grow the business.

Process improvements are often found in purchasing and handling stock, store/restaurant design and layout, customer service, payments, accounting – almost any area of the business. The key is in understanding priorities (what impacts revenue, costs and morale), then finding:

  • The most appropriate method to doing something

  • The most appropriate person

  • Systemising things as much as possible. This might include accounting software, customer service software (for eCommerce for example), POS software or rostering software like Humanforce.

#3 Review levels of compensation

Most employers believe that high salaries are the best way to attract talent. It’s important to remunerate your staff fairly, and paying extra can help to attract talented people, but more often than not money is not a motivator, and talented people are drawn in by more than just money.

Ensuring your company offers interesting and challenging work, a mission to believe in, and a great working culture that offers growth, a balanced work view (with flexibility), and recognition for their work, is what will drive your business to new heights and make everyone’s lives more enjoyable.

#4 Reduce staff turnover

Following on from staff motivation is staff turnover. We all know that cycling through staff is expensive. Even if you recruit internally, there’s time and money in recruiting, interviewing, training and bringing productivity up to speed.

If your business is turning over staff within a 3 month basis you definitely need to assess the working conditions and culture of your business (this excludes seasonal businesses of course).

If you haven’t stopped to assess it, on average, it costs a hospitality business at least $3,300 AUD to hire a new staff. So if you’re doing this on a 3-6 month basis, you can expect to pay at least $6,600 in recruiting costs for a single role.

That’s a significant amount considering the money could be spent on stock, or systems to increase revenue.

If you need some direction, here are some steps to improve staff retention:

  • Have a clear onboarding process

  • Assess staff regularly

  • Develop professional growth and training

  • Conduct company climate surveys

  • Promote a healthy work environment

  • Give staff recognition, autonomy and flexibility

  • Develop a strong company vision

  • Keep your staff informed, and

  • Pay your staff competitively to take money out of the equation

Discover more ways to retain your top deskless workers by downloading our guide to retention.

#5 Cross-train staff

Having specific, specialist roles in your business are important. They allow staff to understand their responsibilities, keeping your business efficient and competitive.

The downside of having specialist roles for everyone is that when someone isn’t available, or they leave, other staff can’t complete the task causing problems in your business.

This also becomes a problem if you’re employing specialists, but their duties aren’t yet critical to the business. While you ramp up workload, you’ll be bleeding money to keep them employed.

To mitigate the risk on both parts, consider cross-training staff and sharing the workload. Most staff will enjoy the learning/growth, and provided roles are clear, it won’t end up affecting the productivity of the team.

#6 Allow flexible working

Yes, flexibility and autonomy is possible for deskless workers. The nature of work undertaken by deskless workers, such as nurses or retail assistants, means they must be present in the workplace, but you can still offer more autonomy around the hours worked, as well as various flex options.

Flexible working conditions can not only help improve the morale and productivity of your staff, but it also helps to mitigate overtime – especially for businesses with long trading hours or irregular working times outside the typical 9-5.

Flexible work arrangements in all workplaces need to ensure that the needs of employees are balanced with the needs of the organisation. This is especially the case in shift-based workplaces where there might be legal and compliance-related reasons for having the right number of people with the right qualifications rostered at the right time and place.

Leaders need to balance staffing requirements to ensure operations run as needed, without the risk and expense of over- or under-staffing, while also ensuring employees get a balance of consistency and flexibility. That flexibility may take any of the following forms:

  • Flex-work time: Work schedules are staggered to create compressed working weeks or flexible working hours

  • Flex-time off: A manager may choose to extend leave days, extend time-off, or reduce daily work hours

  • Flex-work locations: Depending on organisational needs and size, deskless workers have the liberty of choosing where they’re comfortable working – e.g. a retail store closer to home

  • The ability for employees to bid on preferred shifts and swap shifts with colleagues

All of these options are assisted by, and in some cases are only possible with the assistance of, technology. Humanforce, for example, has a Shift Bidding feature, which allows eligible employees to bid for open shifts. After reviewing the location, department and times of the available shift, employees are able to bid for it directly. Staff will appreciate the more open, transparent process, while managers remain in control of final scheduling.

Workforce management software can foster greater flexibility in other ways – from the ability to forecast labour demand with machine learning, to real-time roster changes, allowing managers to get on the front foot and communicate roster changes to team members quickly and efficiently.

By providing employees with greater power over their work schedules, including the ability to balance work with personal circumstances, it reinforces that employees are valued. Once again, it’s that human-centric approach to the employment relationship.

Retail & hospitality

For those in retail and hospitality (and anyone with sales really), it’s important to understand your demand curve of sales and roster accordingly. If you have more sales on a Monday, but it decreases over the week you can schedule more staff for Mondays and reduce staff numbers for the remainder of the week.

The same applies to public holidays, seasonal times like Christmas and local events.

Staff rostering systems like Humanforce that can integrate with POS systems will help you to better predict and manage this process. Obviously the more data you have in your system, the better you will be able to predict your demand curve and roster accordingly.

#7 Reduce conflict

Having the wrong team members, or the wrong culture, can significantly impact the productivity of your workforce. If team members aren’t getting along, time is wasted in arguments, the minds of staff are caught up in conflicts and motivation is low.

Having clear company culture, open communication and clear performance management expectations and processes – in addition to formal policies around bullying and harassment – can help to keep your business running smoothly.

If your staff are having conflicts, make sure you get onto it quickly, rather than hoping it’ll sort itself out. Stacking up of little annoyances is what typically leads to flair-ups between staff, rather than one off large occurrences.

#8 Reduce or re-evaluate perks

Perks can be a great way to motivate staff cost effectively. They can also help develop a unique culture, attract talented staff and keep staff engaged.

If you’re spending money on perks that don’t add much value to any of the above, however, it may be spent better elsewhere. Discuss this with your team and assess whether an alternative would be better, saving costs and keeping morale high. Take the time to understand the motivators of each staff member. Some may be interested in professional development, while others may welcome more health and wellbeing benefits. Being able to tailor a suite of benefits and perks to each person can make all the difference.

Keen to know what perks and benefits are getting cut-through with deskless workers? Download our eBook here.

#9 Automate and outsource non-critical tasks

In every business, there are things that can be done easier, quicker or cheaper. Many staff and managers spend their time on tasks that could be better automated or outsourced, despite the additional cost.

Again, understanding the priority of work, the value it provides and the time it takes is key to improving efficiency. If you’re spending three hours a week cleaning the workplace, surely that three hours could be better spent chasing up stock, hiring new staff or talking to customers. It might cost you $75 to have the workplace cleaned, but you may well have increased revenue by $300 during that time, and your stress could be considerably lower.

Make a list of all the tasks that you do on a daily basis. Break them down into critical and non-critical tasks, then work out which tasks you need to do, and which can be done by someone else. How much could you save outsourcing or automating it? And how much could you increase revenue by focussing your time on critical tasks?

#10 Reduce staff

Last but not least, if you’ve implemented a range of efficiencies and your business is still haemorrhaging money, it may be time to cut staff numbers.

Each business goes through cycles from infancy, toddler, and teenager, to maturity. If your business has grown but is struggling to reach new levels, it may be time to cut down on staff, pivot, innovate and rescale. Just ensure that you’re making changes to the way you do business, otherwise, you’ll face the same challenges you did, each time you reach the same stage of business.  

Humanforce is a leading provider of composable, best-of-breed workforce management, payroll and wellbeing solutions that simplify onboarding, scheduling, time & attendance, pay, employee engagement, and communication for frontline workforces. Founded in 2002, Humanforce has a 1700-strong customer base and over half a million users across a wide range of industries, including aged care, child care, hospitality, retail, local government and more. Today, we have offices across Australia, New Zealand, and the UK.

Our vision is to make work easier and life better by focusing on the needs and fulfilment of frontline workers and the efficiency and optimisation of businesses. Keen to know more? Please contact us or schedule a demo.