No business is ever set up to crash in the long run. That is why many business executives are embarking on strategies to improve profits. Over time, this comes at a price; increased overhead cost and higher payroll expenses. Coupled with economic meltdowns, this can pose a financial burden. Without a doubt, one of the most surefire ways to generate enough funds to infuse them into other aspects of your business is to reduce payroll costs.
When it comes to reducing payroll expenses, typical solutions can include cutting staff, redundancies, downsizing, and so on. But when you let your experienced staff go, the quality of your services or products may take a hit, even if for a short time. You also tend to lose the cordial relationship your employees have built with customers and clients.
There are some measures you can take to reduce payroll costs without impacting your workforce nor your production.
We are going to explore each of them:
Discuss with your staff
This is not exactly a solution to increased payroll expenses, but involving your employees in the discussion of payroll expenses reduction can be a good thing. It will help alleviate rumors of downsizing—bringing calm to their fears. Ask them for ideas to keep the business running while reducing payroll expenses.
It will also allow them to introduce solutions to the problem and strengthen the bond with your business.
Get leased business equipment
Another way you can reduce payroll costs is to get leased business equipment. Admit it; the cost of purchasing new equipment for your business is relatively pricey. This might put your business back for a period of time.
However, when you get leased equipment, you can attract better tax incentives by converting depreciating assets to operating costs.
Re-negotiate contracts with suppliers
One surefire way to trim down on your payroll expenses that will not resort in letting staff go is to go back to the drawing board. You need to identify which deals are unfavorable to your business and renegotiate with the suppliers, vendors, and contractors.
Better still, you can source new suppliers and negotiate better deals for your business. That way you are not sacrificing your experienced staff to reduce payroll costs.
Reduce energy consumption
Take a long look at the premises of your business—in and out. Identify all the equipment and resources that take up much of the energy bills. Typically, you can downsize your equipment if most of it is unnecessary.
You can also invest in energy-saving equipment such as LED bulbs for lighting, reduce heating and cooling systems, etc.
You can sell your outdated machinery taking up space and collecting dust in your business garage. You are going to save up on storage rent.
Think of less-expensive ways to get the work done without sacrificing your staff. Opt for virtual meetings instead of in-person meetings that might generate expenses.
You can place more focus on short term strategies that will garner profits for your business instead of trying to achieve long-term goals.
Get new deals on rent
You can discuss with your landlord to get better deals on rent and renegotiate your lease. Or you can look up new spaces with better deals you can use for your business.
Instead of downsizing your workforce to reduce payroll expenses, try to cut down on productions. If there is a drop in customer demand, it would make sense to reduce production.
You do not need the extra inventory at the moment.
Another alternative to reducing payroll costs without laying off your staff is to expand their duties to areas where you have hired contractors. Admit it; some contractors charge an arm and a leg for duties that your experienced staff can handle on their own.
Why not bring the work in-house? Your workers would be receiving more wages and you will not be releasing outlandish fees during payday. Win-win.
Start a worker exchange program
Imagine a foreign exchange program, but this is slightly different. In this case, instead of laying off some of your workers, you can send them to another company (similar to yours) to work.
You can recall them when it becomes favorable to do so.
Encourage working from home
Due to technological advances and the internet, remote working is a dream come true for business executives. If most of your workforce does not need to be at the office premises, you can encourage them to work from home.
It will save up on expenses you would normally spend when there is a full team on ground and there are benefits to both the employer and employee.
Economic meltdowns come and go. You have to make strategies to boost profits while reducing payroll costs. The aforementioned strategies will help keep your business stay afloat while retaining your experienced staff.
Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.