The current business slogan seems to be “Do more with less.” Nowhere is that hitting harder than in HR. After all, any mention of HR cost reductions inevitably raises concerns of recruitment freezes and job cuts.
But, instead of bracing yourselves for those hideous redundancy conversations, there are many ways that your HR team can reduce costs without losing valuable talent. In fact, you can reduce HR costs in ways that actively drive greater efficiency and increase employee engagement. Read on to find out how.
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Why businesses should strive to do more with less
When considering cost reductions, it can be tempting to simply cut the big expenses — personnel, learning and development, and so on. But cutting costs in areas that drive success could do your business more harm than good. Instead, aim to be strategic and spend efficiently.
This can require you to have some tough conversations with business leaders, who are too prone to think of their employees as a cost. For instance, in the US, financial accounting classifies training and development as an expense, not an investment. This is why hiring freezes and staff cuts can seem like an obvious solution.
In reality, of course, well-skilled, engaged employees are your most valuable asset. Learning and development programmes improve employees’ skills, making them more valuable to the business. Benefits such as paid time off, healthcare and sick leave support employee wellbeing, satisfaction and retention. Rather than expenses, these are investments in a more efficient, effective and productive workforce.
To reduce costs effectively and sustainably, HR teams should look at more than simply decreasing expenditure—they should also aim to improve processes and cultivate a more efficient workforce.
7 ways to cut HR costs without losing efficiency
Here are some of the most effective ways HR leaders can cut costs without slowing down your business or being forced to reduce headcount:
1. Hire internally to make the most of existing talent
Replacing a departing employee costs between 6 and 9 months of that employee’s salary, according to SHRM research. What’s more, when employees leave, it drains the business of valuable experience, disrupts teams and impedes productivity.
However, if HR teams can strengthen their internal recruitment, many of those costs can be minimized or eliminated. By hiring internally, you can:
- Reduce or eliminate the cost of external job postings and recruitment agencies
- Minimize onboarding and associated costs
- Improve time to productivity
- Reduce the risk and expense of making a bad hire
In addition, by providing employees with clear career pathways and opportunities for career development, HR departments can maintain and enhance existing employees’ skill sets, experience, performance and loyalty, enhancing employee retention by 68%.
2. Offer flexible and remote work for a better employee experience
A positive employee experience is vital for retaining talent and keeping those turnover costs low. But what entails a great employee experience?
According to author and Salesforce growth evangelist Tiffani Bova, the five main factors that will improve the employee experience are:
- Mutual trust
- C-suite accountability
- Alignment of employee values and company vision
- Recognising success
- Seamless technology to reduce employees’ day-to-day friction
These aren’t only ways to make your business an employer of choice — they also offer ample opportunities for cost savings.
For example, one area where mutual trust comes into play is by allowing employees to work from home. Just 8% of employees want to return to the office full-time, according to the World Economic Forum, but many business leaders are still trying to force everyone back to the office, often through a sense of productivity paranoia.
Flexible options give businesses opportunities for cost reductions such as:
- Office space and rental
- Utilities, such as electricity and water
- Travel subsidies to employees
- Salary adjustments
More importantly, flexible and remote work contribute to job satisfaction, which encourages retention (which, as we saw earlier, is also a major cost saving).
3. Offer frictionless work tools to optimise team efficiency
As Bova reports, technology is central to creating a positive employee experience while maintaining productivity.
A user-friendly Employee Experience Platform (EXP) like Applaud HR provides features that can help HR teams and employees be more productive and cost-efficient:
- Self-service tools empower employees to manage their own HR-related tasks
- Automated workflow builders to manage processes across departments
- Mobile-enabled platforms provide a consumer-grade experience to make remote work just as productive
4. Invite employees to offer suggestions for cutting costs
It’s also worth engaging your employees themselves to help identify ways to reduce costs in how they work. Operations consultants Patrick Daoust and Paul Simon have seen businesses achieve transformational cost savings by gathering feedback and data from employees: “By supplementing one leadership team’s top-down analysis with qualitative and quantitative data from vice presidents, directors, and employees, one fast-food restaurant chain was able to reduce its sales, general, and administration costs by more than one third.”
Applaud HR’s pulse surveys can make it easy for your HR team to gather feedback from the employees at the coalface, to identify and evaluate inefficiencies in core processes and make strategic decisions about making those processes more cost-efficient.
5. Streamline HR processes and automate busywork
“AI-powered recruitment solutions offer digital assistants that can ensure newly hired employees complete their tasks and help them get the guidance they need. They add a valuable tool to your toolbelt that helps you save costs and more effectively engage with your employees and new hires."
Digital HR platforms can help HR teams be more efficient, automating busywork such as data entry, document management, reporting and applicant tracking. Automation can also cut costs and optimize processes in areas such as onboarding. This helps reduce time-to-productivity, further cutting down hiring costs, while also benefiting employees by offering a more consistent experience.
“Managers get busy, and communication breakdowns can prevent them from training their new hires effectively,” says Kashif Aftab, CEO of e-commerce talent marketplace SkillGigs. “AI-powered recruitment solutions offer digital assistants that can ensure newly hired employees complete their tasks and help them get the guidance they need. They add a valuable tool to your toolbelt that helps you save costs and more effectively engage with your employees and new hires."
6. Consider HR outsourcing
If you’re wondering how to reduce costs in HR departments, GNA Partners research suggests that outsourcing HR services can reduce admin costs by around $450 per employee. How does HR outsourcing reduce costs? Both by eliminating or reducing the need for in-house HR staff and related expenses, while leveraging specialized external providers at an outsourced company to handle tasks like payroll, benefits administration, and recruitment more efficiently.
“Some companies feel they need HR in the building,” says Jamie Sieja, Director of Marketing at Flex HR, “But living through COVID has proven that HR can absolutely be outsourced efficiently. Outsourcing means that the company does not have to deal with turnover or training new people, which have been huge cost factors in HR.”
There are potential downsides, however. Writing in Harvard Business Review recently, Peter Capelli, director of the Wharton School Center for Human Resources, warned that “temporary and leased employees… are less knowledgeable and less committed,… make more demands on management, create coordination challenges… and irritate regular employees, who worry about their own status and jobs and become less engaged.”
Instead of outsourcing the full HR function, a more strategic way of saving money could be to let an external partner take care of routine HR busywork like resume screening, payroll, benefits administration, IT services and so on, while retaining an in-house HR team that focuses on core people processes.
7. Consolidate your HR tech stack
46% of HR leaders say HR technology is their top priority in 2023. When choosing a HR platform for your business, it’s important to look beyond the price tag to consider how it can help you reduce HR costs.
- An all-in-one platform keeps the costs of licensing, maintenance and upgrading to a minimum.
- Cloud-based solutions help reduce the costs of in-house infrastructure and energy expenses, and offer more flexibility and scalability for remote and hybrid teams.
- User-friendly solutions like Applaud’s no-code design allow HR staff to build, maintain and upgrade an agile platform without having to rely on IT or external developers.
Consolidating your tech stack not only makes it simpler and less costly to build and run, it also ensures less disruption to workflows, increasing productivity for your HR team. And with access to actionable data, HR teams can analyze that productivity, performance and engagement turnover to inform decision-making and deliver great ROI.
Do more with less with Applaud
Cost reduction doesn’t have to mean a loss of efficiency and quality—or the loss of staff. Rather, cost reduction can offer an opportunity to reevaluate and redesign strategies to make your organization more efficient and resilient.
Being strategic about how you streamline your HR systems to get more for less can be a benefit to the business, eliminating wastage and blockages and allowing your business to run more smoothly and more profitably.
To find out how Applaud HR’s Employee Experience Platform can help you reduce HR costs in your business, request a demo.
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