Home / 2009 / February 2009 / Reducing Labour Costs

Employers have invested time and money in recruiting and training staff, and it is during difficult times that they need to see real return from their investment, says Janet Wallace.

The main goal for resizing and managing your payroll costs is to make sure you do not lose key people in the business. It is critical that employers look at all options for cutting employment costs, and consider how to do it very carefully before taking the critical decision to lay off employees.

REDEPLOYMENT OF STAFF A recent survey highlighted that 46% of Irish companies have chosen to redeploy their staff in preference to making roles redundant. By moving staff to different departments, their skills can be used to the advantage of both the company and the employee.

HIRING FREEZE Some 60% of Irish companies currently have a freeze on hiring. This includes not replacing staff that resign, retire, transfer or leave the company and prohibiting the creation of new positions.

RESTRICTING OVERTIME, BONUSES, COMMISSION Companies should consider restricting overtime, bonuses and commission ahead of other options. It is relatively easy to implement change as these payroll costs are often discretionary.

VOLUNTARY SABBATICALS Encourage employees to take unpaid leave of absence for a period of time for reasons such as education, travel, volunteer work or to facilitate family commitments. This can be a good way to cut costs without losing the valuable people you have spent time recruiting and training.

REDUCED HOURS A popular option with many companies at present is to offer employees reduced hours. This provides flexibility and free time for your people and may be welcomed by some employees. It is important to note that reducing working hours is a change in the employee’s terms and conditions of employment so employers must get agreement from the employee prior to implementing any changes.

PART-TIME Some full-time employees may welcome an opportunity to work part time. This is a good time to offer the option to your people but may need to be restricted to particular parts of the business or particular roles.

EMPLOYEE CONTRACTORS Perhaps you have an employee who could be self-employed taking control over his/her own work life and providing you with a service you need through a contract arrangement? This can be a good option where you need to retain expertise within the business while managing costs.

SALARY ADJUSTMENTS Consider putting a freeze on salary increases and temporary or permanent pay cuts but bear in mind that these are more difficult to implement as staff strongly resist any changes to basic salary packages.

Janet Wallace is a HR Solutions Consultant with Russell Brennan Keane.