Five Creative Ways to Reduce Labor Costs

Five ways to cut labor costs and increase profits

Reduce Labor Costs

Labor costs take up a huge portion of a company’s expenditures. Unlike the cost of goods, labor costs can be much more unpredictable and your return on investment can vary greatly. In fact, if left unchecked, it can put a company in real financial peril. So we have outlined five creative ways to reduce labor costs to help you meet that year-end budget.

Trying to save on labor, while keeping your labor force happy is a delicate task and one that requires both skill and resourcefulness.  However, it is not impossible. By implementing a few key strategies, you can be well on your way to regulating and minimizing your labor costs, while adding value to your internal culture and workplace environment.


  1. Employee Retention Program

Turnover can cost a company a small fortune.  From the cost of recruiting and training to unemployment expenses, it adds up quickly.  Having a small team dedicated to optimizing the employee’s experience is a great investment that will reduce your overall turnover dramatically.

I wouldn’t call the program “employee retention” (perhaps something a little more fun), but essentially, this is the team responsible for addressing training and tool deficiencies within the labor force.  They also help drive the culture and should be privy to any points of contention on the floor, before they become a big issue.  The great part is, you don’t have to hire any new staff for this role.  Incorporate the role into a few human resource or training staff job descriptions and have a few employee volunteers make up a group that meets weekly or monthly.

  1. Optimize Real Estate

The cost of housing your staff can be tremendous, especially if you are located in an expensive part of town. However, with a little creativity, you can greatly reduce the amount of space you actually need per employee.

The days of long and formal company meetings are a thing of the past.  Why not turn your big meeting room into an employee rec room or additional group workspace?  Convert your meetings into “stand ups” where everyone gathers around in a less formal setting.  It will remind you to keep  you meetings short and keep your employees awake for the entire meeting.

You can also try converting traditional cubicle workspace into group workspaces.  Everyone will still have their own desks and it will help with cooperative work.  Repurpose a few of the cubicles as “seated telephone booths” should anyone need to make a call that requires absolute silence.

A few other ideas might be to allow work from home days for certain staff or changing the work schedule of non-essential 9-5 positions to a later shift.  Ways to reduce labor costs can come in many forms, look at processes and procedures and we are sure you will find even more ways.

  1. Staffing Agency

A staffing agency is a great idea for those positions that come up seasonally, or for special projects. Maybe even you should be considering a temporary employee for a while before jumping into a full time permanent role.  Another great way to utilize a staffing agency is when you are in a growth period.  Whether just starting out, or going through a substantial growth period, chances are you will need more staff, but may not know exactly how much more.

By utilizing a staffing agency, you have the flexibility to test and adjust for your needs.  If you are just starting off, a staffing agency also eliminates the need for you to hire a human resource manager or attorney to set up federal withholding and such.  Essentially, it lets you test the waters of employer-hood before diving in head first.

Most people see an agency as adding costs, but that is purely caused by not looking at the costs of not hiring one. Your time, your teams time, setting up interviews, reviewing resumes all add up. One of the ways to reduce labor costs is to to truly review your hiring process and see if you are wasting too much time doing things that would be best left to an expert in your hiring field.

  1. Create SOP

We all know creating standard operating procedures are necessary.  We even understand how they reduce errors and increase productivity and contribute to employee satisfaction.  But who has the time?

You may be surprised to find out that your staff actually has the time.  In fact, most of your best employees have created their own SOPs in some fashion.  It is also these same, veteran employees who are most annoyed by the inconsistencies of new employees struggling to establish their own process.  Why not ask a few of your best employees to take one task a month (or quarter) and formalize their own SOP along with a short Snagit video training on the process.

Most will be happy to do this for free if it means a better co-working experience and a responsibility they can add to their resume, but you may want to sweeten the deal with a slightly lessened work load or bonus.

  1. Mentor Program

Training costs make up a large portion on an employee’s onboarding expense. Sometimes, training programs can be unnecessarily long.  The fact is, while you do need a solid foundational training in the classroom, most of the applicable skills will be learned on the floor.  A great way to shorten in class training, while optimizing an employee’s training experience is to offer a mentor program.

The mentors should be selected by the training team, to ensure they are getting a solid education and guidelines and objectives should be supplied to the mentors.  This will not only give your employees more confidence when they hit the floor, but they’ll also have experienced some of the trouble shooting issues and know how to resolve them.  They will even have inherited some veteran tricks of the trade from their mentors and their productivity will reflect it. Ways to reduce labor costs should be an ongoing review, not just at budget time. Take 30 minutes a month to look at processes and people it will be worth every minute.

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