Table of Contents
Most business owners are constantly on the lookout for ways to reduce labor costs and make their company more profitable. The challenge, of course, is coming up with news ways to do so without cutting staff. As companies grow, so do their administrative overhead costs. How can businesses increase profit and expand while reducing labor costs? Here are five ways to do just that.
SERVIAP can help with your global expansion needs. Contact us today to learn how you can expand your business with PEO in South America and Latin America.
Create Predictable Schedules
One of the biggest sources of extra labor costs is overtime. When certain employees work beyond a certain number of hours in a day and/or week, employers are required to pay overtime. This extra pay is on top of the normal rate and is often at least 1.5 times the standard hourly rate for every employee.
Companies that don’t properly project and plan for the hours and shifts they’ll need covered will often be forced to pay workers overtime. To avoid this extra labor cost, business owners should take the time to properly project their need for workers and shifts.
This can be especially challenging for seasonal businesses, such as the retail sector. However, proper planning and projecting will help reduce overtime even in that industry. Once you identify the shifts you’ll need, you can optimize schedules so you have enough employees on staff to avoid paying overtime.
Minimize Turnover
When companies have high employee turnover, they are forced to spend a lot of extra money recruiting, hiring, onboarding and training new workers. This is a labor cost that can be reduced significantly by ensuring employees want to stay at your company.
Employees leave companies where they don’t feel appreciated, are underpaid, or aren’t empowered to do their jobs. Most employees today don’t want to just be given tasks to complete and paid in return. They want to be actively involved in helping their companies succeed.
Consider providing opportunities for training and skill improvements, and ensure your team has what it needs to excel. You should also work to create a fun and inclusive work environment where employees are encouraged to give input and share feedback. When you allow employees to have a voice in how the company is run, they feel more a part of the team and are less likely to leave.
Provide Incentives
A great way to keep employees happy is to incentive their performance. This can be done in a number of ways. The most obvious way is to award financial bonuses to employees who achieve certain goals that their managers set for them. These goals should be measurable and result in a positive return for the company as well.
You can also incentivize employees with other non-financial means. This could include employee recognition programs such as Employee of the Month awards or extra paid days off. Employees aren’t always incentivized by money, so you can get creative with ways to reward workers for a job well done.
There of course will be a labor cost associated with these incentives. However, if you design the incentives correctly, you will get a positive return on investment. In addition, these costs should be significantly less than what it would cost to replace employees who leave.
Streamline Your Processes
One of the biggest labor costs comes from inefficient processes. From time to time, you should review all of your company’s processes to ensure they are optimized for efficiency and cost.
At times, you can eliminate entire tasks by updating your processes to reflect where your business it today, rather than where it was when the process was initially created.
Various technologies can also help you to streamline processes and cut costs. In the past, a lot of manual labor was required to complete tasks such as timesheets and payroll. Today, there are software programs that can help streamline these processes and reduce the amount of work required.
Outsource Certain Processes
Another option is to outsource some of your company’s processes to another company. Some of the most popular and common tasks to outsource are call centers, IT services, and HR departments.
There are many different options for businesses to outsource today—from local outsourcing to nearshore and offshore outsourcing.
One great option is to hire a Professional Employer Organization (PEO) based overseas to handle all of your administrative functions. In this scenario, you can realize significant labor cost savings by hiring skilled workers at a reduced labor cost and having the PEO handle all of the associated payroll processing, employee benefits, and other HR tasks.
The great part about working with a PEO is that it will be a co-employment relationship. In other words, you won’t lose control of your workers. Instead, you will still be the official employer of your outsourced workforce—even if they are based in another country. Meanwhile, the PEO can help to eliminate administrative burdens by managing compliance, taxes, and more.
Expand Your Business
SERVIAP is a leading Professional Employer Organization (PEO) ready to help your business expand operations throughout the Western Hemisphere. PEO is a model of co-employment, where we assume total responsibility for your talent, allowing you to focus on the strategic activities of your organization. Contact us today to learn more about how you can expand your business in South America and Latin America.
