Labor costs can quickly add up and cost your business a lot of money. Check out these tips and tricks for reducing your employee costs.
Did you know that labor costs can eat up over 30% of a typical business’s revenue? For some business models, this number can climb as high as 50% or more.
Are you spending more than you can afford on labor costs?
Unless you run a one-person show, labor costs are unavoidable. However, there are ways you can reduce employee costs while still having enough hands on deck.
Wondering how this can be done? Keep reading to find out our top labor cost reduction tips.
Look Into Commission Based Pay
If you’re looking to cut costs without cutting staff, you might want to consider commission-based pay. Commission-based pay has a number of advantages. Not only does it incentivize employees to actively sell your offerings, but it also reduces your labor costs when sales are low.
Of course, commission pay doesn’t work for every type of worker.
However, if you have a contingent of sales agents, store attendants, waitrons, or anyone else that is actively involved in selling your offerings, you have an opportunity to implement commission-based pay.
Consider Offering a Revenue Share to Employees
Another way to incentivize employees is by offering a revenue share. Although this won’t decrease labor costs every cycle, it will tie them to your revenue.
When revenue is high, employees will benefit. When revenue is lowered, you will have reduced labor costs.
Another benefit of revenue sharing is that you can apply it to all employees, not just the ones in sales-type positions. You can offer it to all employees and give yourself a cushion of reduced labor costs during times when revenue is lower than expected.
Invest in Time Tracking
Revenue sharing and commission pay models are great for increasing productivity. However, time tracking is the ultimate strategy when it comes to making sure you’re only paying for actual hours worked.
According to research, absenteeism and employee tardiness can account for up to 20% of labor costs. That’s a chunk of money. If you’re trying to reduce labor costs you definitely want to cut down on this unnecessary expense as much as possible.
With a good time tracking software solution, you can accurately keep track of when employees clock in and out.
Cut Down On Overtime Hours
Another impactful way you can reduce labor costs is by taking control of overtime. Depending on your business model, it can be very easy to unintentionally “ask” employees to work overtime.
For instance, during a shift change, an employee might ask you if you need an extra person on the next shift because the store is unusually busy. Unthinkingly, you might say yes, and the next thing you know that employee is working overtime.
Not only will this trigger overtime pay, but it can also lead to penalties in certain jurisdictions if the employee doesn’t have enough time to rest between shifts.
One solution is to try and keep track of employee hours manually. However, a far more accurate and efficient method is to use time tracking software that automatically shows you which employees are close to logging overtime.
Streamline Your Labor Costs Today With the Right Time Tracking Software
If you’re looking to cut down on labor costs, you can generate cost savings by tieing employee costs to revenue through commission pay and revenue sharing.
You can also effectively log work hours and cut down on overtime costs (and potential penalties) through the use of time tracking software.
If have yet to implement modern time tracking for your business, the time to do so is now, and the place to start is right here.
At timetrak, we are committed to providing business owners with intuitive, easy-to-use time tracking software that will save you money and time. Contact us to schedule a demo and experience the benefits for yourself.
