14 ways small businesses can decrease their people costs right now
- LabourGains Staff
- Jul 19, 2023
- 3 min read
Updated: Oct 27, 2023
Reducing people costs for a small business can be a challenging task, but it's essential for improving profitability and long-term sustainability. However, it's crucial to approach cost-cutting measures thoughtfully to avoid negative impacts on employee morale and productivity. Here are some effective ways to decrease people costs for a small business:
Put vacation pay on each cheque: There are 3 main methods of paying employee's yearly vacation entitlements - accrued method (the most common; a lump vacation pay is banked and them paid in a lump sum when the employee goes on vacation), salary continuance (where you pay them as normal when they go on vacation, as though they never left), and the 'per pay cheque' method. The first 2 methods result in compounding payment (ie. each year you pay vacation including last year's vacation pay), but in the 'per pay cheque' method, you only pay it based on hours worked in the pay period.
Use averaging agreements for OT: In each province, after a worker reaches a certain daily hours of work threshold (often 8 in a day or 40/44 in a week), a premium pay rate of 1.5x is due, UNLESS, you implement an averaging agreement with them.
Streamline Operations: Identify inefficiencies and streamline processes to eliminate redundant tasks and wasteful activities. This can improve overall productivity and potentially reduce the need for additional staff.
Outsourcing and Freelancing: Consider outsourcing non-core functions or hiring freelancers for specific projects instead of employing full-time staff. This approach allows you to access specialized skills when needed, without the ongoing expenses of salaries, benefits, and office space.
Cross-Training Employees: Invest in cross-training your existing employees so they can handle multiple roles. This flexibility allows you to do more with a smaller workforce, especially during slower periods.
Flexible Work Arrangements: Offer flexible work arrangements, such as remote work or compressed workweeks. This can reduce the need for office space and may lead to increased job satisfaction and retention.
Performance-Based Pay: Implement performance-based pay structures to incentivize employees and reward top performers, aligning pay with productivity and results.
Employee Retention Strategies: High employee turnover can be costly due to recruitment and training expenses. Focus on employee retention by creating a positive work culture, providing growth opportunities, and offering competitive benefits.
Technology Investments: Invest in technology that can automate tasks and improve efficiency. While there may be an initial cost, it can lead to long-term savings by reducing the need for manual labor.
Voluntary Benefits: Offer voluntary benefits that employees can choose to opt into, rather than providing a one-size-fits-all benefits package for all staff.
Internship and Apprenticeship Programs: Consider hiring interns or apprentices who are willing to gain experience at a lower cost, while you benefit from their contributions.
Part-Time or Temporary Employees: When appropriate, hire part-time or temporary employees to handle peak workloads, seasonal demands, or short-term projects.
Salary Negotiation and Benchmarking: Negotiate salaries with new hires based on market rates and ensure your current employees' salaries align with industry standards. Overpaying can significantly impact your people costs.
Employee Feedback and Ideas: Encourage your employees to provide feedback and ideas on cost-saving measures. They may have valuable insights into improving efficiency and reducing unnecessary expenses.
Remember that maintaining a positive and supportive work environment is crucial for employee satisfaction and productivity. While cost-cutting is essential for business sustainability, it should not come at the expense of employee well-being or job security, additionally, you must give employees adequate notice before making any significant changes to their terms and conditions of employment.
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