Payroll is a huge part of any Business’s Expenses
Luckily, anyone can reduce their payroll costs without reducing staff!
It is actually quite simple just take a look at your people’s:
Say What? Aren’t Cost and Spend the Same? Nope, not in this context…
Cost is about your commitments; Salaries, wages, and related taxes etc that are your payroll. The stuff that still costs you money whether your people are on holidays or not – pay both your Troops and Generals fairly, plus don’t lose sight of replacement costs.
Spend is about the “discretionary” extras related to having employees. These extras can be quite comprehensive, and are often the most closely examined – from the costs of morning tea, to Christmas parties and how fancy is the toilet paper each person is allocated.
So yes, from an accounting point of view Cost and Spend are very similar, but here I have used different words to try to separate the concepts of the money you know you are in for year in year out, and the money that adds to your staff costs (sometimes quite unchecked).
When you set time aside some time every month to review your accounts, also spend a little bit of time considering the tasks your business needs: What tasks can be performed by Troops and which staff can upgrade the complexity of their tasks and move towards becoming Generals?
i.e. Is there anyone in your business that with a little bit of help can be up-skilled in a cost-effective way, and are there tasks in your business that can be moved down the seniority ranks.
The 7 questions below cover all three areas of your staff and by regularly asking and addressing these questions you will constantly save Payroll costs.
3 Areas to Save Payroll Costs – 7 Questions to Ask
There is no right or wrong here – this process is asking key questions to gain clear information about where salary and non-salary savings can be made and then making informed decisions;
Area 1: Save Payroll on Fit
Fit is about the right activities and skills needed in the various parts of your business
Question 1 – What jobs/activities does the business require?
Look at what is needed to deliver what your customers expect. Start with all the activities required to deliver all the work – don’t think about who you have at the moment, instead build a wish list. Then sort and group all these activities into an ideal set of employee roles clearly listing the activities of each and how the activities fit together to deliver your perfect customer outcome.
Question 2 – What Skills does each activity require?
Looking at the Activities from above, consider the skill levels:
- How and where can you use a lower (cheaper) level of skill?
- Will two trainee staff PLUS a skilled supervisor work better than three mid-level staff?
Don’t gloss over this part – do you really need a secretary to “help you support the customers”, or is that role full of activity
running a lot of ‘envelope licking’? Both options are fine – how you run your business is totally up to you! But if you are looking to cut costs, it could it be more appropriate to let a secretary continue to do more actual client support work and to also hire a student for 2 hours a day to do the basic running around?
– The key to remember is Generals are more expensive than Troops, so deploy all your people where your business benefits most from the skills the staff have!
Question 3 – Can the existing staff do all the activities needed?
Now think about your existing staff:
- Are they a good fit for the roles you have outlined?
- Are they capable of performing all the activities in their role?
This is not about DISCARDING good and loyal staff, this is a process of assessing where a small outlay can be
used to retrain or up-skill existing staff members to create long-term rewards – sometimes a small short-term
increase in costs has a larger long-term cost reduction outcome.
If you do have a staff member that is unable to perform their required activities, you also need to take action.
Consider that you are in business and calculate how much it is costing to continue to carry this person – again,
how you run your business is up to you, but the most profitable businesses are run by constantly making informed
decisions, as opposed to not noticing and/or ignoring leaks and strains.
Download this checklist for the rest of your details and support for these remaining 4 Questions[/twocol_one]
Area 2: Save Payroll on Costs
Costs are about your commitments; Salaries, wages, and related taxes etc that form your payroll.
Question 4 – Is the person being paid the right amount for the job?
Question 5 – Are you getting appropriate outputs/activity from each person in the job?
Area 3: Save Payroll on Spend
Spend is about the “discretionary” extras related to having employees beyond the cost of payroll such as how fancy the toilet paper is.
Question 6 – How much do you spend on each employee?
Question 7 – How much does each employee spend?
Reminder – this process is about ensuring you think about what you want your staff to be doing and then gain clear information as to what you have in place, and what your people costs really are. You can then make informed decisions about what you want to change to save payroll costs. By undertaking this process regularly you will also curb “cost creep” and remain a lean and fit, profitable business.
Do you have any other ways to save payroll costs?
If so, feel free to share them in the comments section below….
Now that you have a taste of whaat we can do… here are some more options to improve your business profits: