Reduce Payroll Costs Without Layoffs

The economy has us all a little worried, right? We’re all trying to do the best we can with what we’ve got, especially when people aren’t spending money like they used to. There aren’t a whole lot of basic solutions. You either increase income or decrease expenses. Payroll costs can be significant. Can they be reduced without layoffs?

A profit and loss or income statement will show the biggest expenses in a business. Generally, for a product-based company, those are inventory, insurance and payroll. You may need a reduction in inventory, but it isn’t likely. You should shop around for more affordable insurance coverage but your biggest expenditure with some serious flexibility will likely be payroll. There are ways to reduce your payroll costs without cutting staff.

You should review your benefits coverage and see if you can find a less expensive policy. Employees will prefer having some soft perks, like company picnics and employee banquets, temporarily eliminated instead of facing job loss. Once things improve financially, you can return business to normal.

Always be on the alert regarding overtime. Sometimes rescheduling individuals and offering flexible schedules can reduce overtime. If you pay for lunch hours, consider eliminating this at least in the short-term. Depending on the number of employees, these small cuts can make a big difference without having to resort to layoffs.

Research has shown that for every 100 hours of paid productive time, you are paying for at least 2.3 hours of non-productive time. This is called presenteeism or lost time when employees are present. Before you start laying off individuals, see if you can improve productivity to maximize your payroll dollars.

Productivity is reduced by employees who come to work sick, manage personal problems by phone, take smoke or unnecessary bathroom breaks or socialize with coworkers. Often employees are reluctant to call off when they are sick or to use counseling services if they are experience personal problems or job stress.

Absenteeism and productivity issues are generally curbed through disciplinary action. More effective methods may be offering a paid leave bank (or “paid time off”) instead of dividing it into sick and vacation time. This way employees can use their time without fear of reprimand. Accommodating personal lives through telecommuting and flexible scheduling can be both a perk and curb presenteeism (paid non-productive time). And consider and employee assistance program to provide counseling for your employees.

You will build loyalty and improve relationships with your employees if you try other actions before resorting to layoffs. Small reductions in other areas can be enough to save positions. Be sure you consider some of these tactics first before you take that last, though sometimes necessary, step.

With 30 years of business coaching experience, Steven Schlagel provides training and coaching for startups, entrepreneurs and small business owners. Check his site for more articles to increase your success!