How Small Businesses Can Reduce Labor Costs

How Small Businesses Can Reduce Labor Costs

Controlling costs is a fundamental aspect of running a small business, and nothing can increase them faster than labor. For many corporations labor costs will be their most significant expense, and while many attempt to mitigate the issue by paying their employees less, at best this is a temporary fix that will create long term issues. Below are some ways to maintain reasonable costs for labor over long periods of time.

Recruit Freelancers For Work That Is Short Term

There are some projects which do not require the work of a full time employee, and can be delegated to a freelancer instead. Examples of this include website redesign or tax management. Freelancers don’t require the benefits that many employees must receive by law and as such are responsible for their own healthcare and other things of that nature. Recruiting freelancers can save you substantial amounts of money over the long term.

Provide Employees With Cross Training

Employees who prove themselves to be responsible, ambitious and quick learners should be cross trained, or taught multiple skillsets simultaneously. While we live in a society that is increasingly moving towards specialization, being a generalist has its benefits, particularly when it comes to lowering labor costs. An employee that can perform multiple tasks and roles reduces the need to bring in new workers, which keeps costs for labor low.

Use Profit Sharing To Reward Employees Who Sell Your Products

While profit sharing may not seem like a way to reduce your costs for labor, it is. Consider how much you spend on advertising and marketing. What if your employees were offered the opportunity to market and sell the products or services on your behalf, with the understanding that they would receive a cut of the profit by doing so? This would be much more cost effective than hiring new workers, and you would also reduce marketing and advertising costs.

Whereas with advertising and marketing you’re required to spend money up front with the expectation that the exposure will result in increased sales down the road, with profit sharing you only pay employees “after” they’ve already sold your product or service, which is far more efficient and lucrative. While many employers foolishly attempt to keep their costs of labor low by paying their employees less, with profit sharing you can keep your costs low by paying your employees more.

Organize And Streamline Your Work Schedule

The times in which your employees work are just as important as how much they get done. If your weekly schedule is disorganized, you will actually end up paying more than you should be. You should have specific employees working on specific tasks at certain times and if they are cross trained they can focus on different tasks on different days, perhaps rotating with other employees. Time management is a key component in being able to lower costs of labor. The better your time and that of your employees is managed, the more money you’ll hold onto.