10 ways your business can reduce labour costs

Labour costs are one of the biggest expenses for any frontline business. While your business is growing, calling in extra manpower to keep up with demand may seem plausible. But as the business reaches maturity and sales begin to taper off, labour costs can quickly get out of hand, causing unnecessary strain on your overall budget. 

Many business owners resort to layoffs or reducing work hours for existing staff, which is never a pleasant thing to do when times are already tough. Luckily, there are many other avenues you can take to optimise your spending on labour costs — before scheduling any difficult conversations.

1. Avoid overtime 

The easiest way to avoid unnecessary labour costs is to avoid overtime. An hour here, an hour there — it may not seem like much, but it adds up over time. Frontline, shift-driven businesses with larger workforces, especially, need to consider that pay rates increase by up to two times the regular hourly rate. Multiply this by the number of staff on the floor, and it quickly becomes unsustainable.  

Effective rostering is the key here. Being able to schedule and manage resources more precisely reduces the need for excessive overtime, and also allows managers to track the overtime costs they incur.  

For example, Humanforce’s Rostering & 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. This ensures the business can optimise costs while remaining compliant. 

In essence, effective rostering is all about balancing the needs of workers with the needs of the organisation; it’s about ensuring the employee is qualified, present, and paid correctly. Happier, healthier employees are generally more productive and provide better customer service – so it’s the ultimate win-win.

2. Streamline processes 

Making changes to your business’ processes is a great way to increase overall efficiency, especially in terms of labour costs. Businesses that operate with all functions in tandem, like a well-oiled machine, are much less likely to blow budgets on things such as overtime, outsourcing, and more.   

Imagine a team that performs the same task two times or more, or a business that still uses pen and paper to write their timesheets. These act as unnecessary time-sinks that can be easily streamlined through HR/workforce management software and process documentation. The idea here is to clearly state the responsibilities of each team member and how each project should consistently be handled.  

A common misconception is that structured processes equal micromanagement. Many business owners then strive to be a one-man-band, wasting time on tasks that can be easily delegated. In cases like this, staff end up wasting time on repetitive tasks that aren’t contributing to business growth.

Purchasing and handling stock, store layout and design, roster creation, customer service, payments, and accounting are examples of tasks that can greatly benefit from automation or written process guidelines. The first step is understanding priorities (what impacts revenue, costs and morale), then finding: 

• The most appropriate method to doing something 

• The most appropriate person to do it 

• Documenting the process and systemising them. This might include accounting software, customer service software (for eCommerce for example), POS software or rostering software like Humanforce.

3. Review levels of compensation 

We can’t say “less is more” here, but many employers believe that high salaries are the best way to attract talent. There’s no doubt that it’s important to remunerate your staff fairly, and paying a little extra can help to attract talented people. But oftentimes, talented people are drawn in by more than just money.  

You can offer a lot more for your employees than just money; challenging work, a mission to believe in, work-life balance and shift flexibility, learning and career advancement opportunities, and a positive culture are often worth more than a few extra dollars.

4. Reduce staff turnover 

Staff turnover can stealthily drain your labour budget and overall productivity. It’s not just the fees for job ads, or money spent on welcome lunches — but the hours lost having to interview, onboard, train, and develop new talent, even if you’ve hired internally.  

Take a look at your turnover figures. If, for example, your average staff turnover is three months, it’s time to assess all aspects of your business (this doesn’t apply to seasonal businesses of course). Perhaps the working conditions aren’t desirable, or the culture has become toxic.   

According to the Society for Human Resource Management (SHRM), the cost of recruiting a new employee on average is around USD4,700.  If you’re doing this on a three-to-six-month basis, the cost for a single role becomes unjustifiable. This is capital that can be spent elsewhere in the business.  

If you need some direction, here are some steps to improve 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

5. Cross-train staff 

All businesses can benefit from having specialist roles, and frontline teams are no different. Think about an Aged Care home with an experienced registered nurse on site, or a cafe owner working the coffee machine while taking orders. They’re the experienced, knowledgeable figures that can provide training for staff and keep things running smoothly. 

However, things can fall apart quickly if these individuals fall ill or decide to leave the business. In their absence, other staff may not hold the knowledge or skillset to carry out their duties in lieu of them. 

For this reason, managers should consider cross training between specialists and regular Staff can benefit from learning new skills, while specialists ease some weight off their shoulders. In the event of the specialist’s departure, the business can continue running as usual.

6. Allow flexible working 

Yes, flexibility and autonomy is possible for deskless workers. While the nature of deskless work often requires physical presence, businesses can still offer autonomy around 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 reduce the amount of overtime hours worked — especially for businesses with long trading hours or irregular working times outside the typical 9-5.  

However, flexible work arrangements must be created to balance both the needs of employee and 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.  

Managers 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 as they please. 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 AI, 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, the business reinforces that they value and trust their employees. For frontline staff under heavy workloads, it’s the human-centric approach that counts.

7. Identify and end conflict 

Having the wrong team members, or the wrong culture, can significantly impact the productivity of your workforce. Staff who bicker, argue, or are constantly caught up in conflict can impact team morale to a large degree.  

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 foster cooperative, amicable teams.  

If you notice conflict between staff, make sure you get onto it quickly. Generally, it’s a buildup of smaller confrontations that leads to larger flair ups. Intervene, mediate, and set boundaries to quash conflicts before they end in disciplinary action. 

Not only do dismissals increase your turnover figures and costs to re-hire but can genuinely be a waste of talent if the employee simply lost their cool, or was provoked, for example.

8. Reduce or re-evaluate perks 

Perks are a fantastic, cost-effective way to motivate staff. They can enrich team culture, attract talented staff, and keep current members engaged. 

On the other hand, spending money on undesirable perks is money better spent elsewhere. Discuss this with your team and assess whether there is an alternative they would prefer. 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 for each person can make all the difference.  

Keen to know what perks and benefits are most desirable to frontline workers? Download our eBook here or read about Humanforce’s wellbeing benefits suite here.

9. Automate and outsource non-critical tasks 

Every business has tasks 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. 

Understanding the value of the task is key. For example, is it worth spending three hours per week cleaning the office space? Perhaps it can be outsourced to a cleaning company, freeing your staff to spend three hours making deals, managing inventory, or hiring staff. 

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 revenue could you generate by focusing your time on critical tasks?

10. Reduce staff 

This is the last resort. If you’ve tried all the above and are still losing money, it may be time to consider trimming down your workforce. 

Each business has a lifecycle — from launch, to growth, maturity, and eventual decline. 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. If downsizing is the most favourable option, it’s wise to do so with the assistance o employment lawyers to avoid any compliance hiccups.

About Humanforce 

Humanforce is the all-in-one platform for frontline and flexible workforces, offering a truly employee centred, intelligent and compliant human capital management (HCM) suite – without compromise. Founded in 2002, Humanforce has a 2300+ customer base and over half a million users worldwide. 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. 

To learn more about how Humanforce’s solutions can help automate people processes in your business, please contact us.