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Reduce Payroll Costs Without Layoffs

09.08.2009 · Posted in Home and Garden Articles

With the economy in a slump. many small businesses are struggling financially. There are only two ways to improve your bottom line. You can increase revenue or reduce expenses. With customers not spending like they were, increasing revenue may be impossible. One of the biggest expenses is payroll, but can you cut this cost without reducing staff?nnWhen a business owner or manager begins to look at cutting costs, the first thing that gets pulled is the income or profit and loss statement. In a typical product-based business, the biggest numbers are usually product, insurance, and payroll. Product is usually out, unless you have serious inventory issues. You have to have something to sell, or you’re not in business at all. You know you can’t ditch your insurance expense. That leaves payroll and all the related costs that go along with having employees. You don’t want to lose anyone – the economy will pick up eventually. How do you cut payroll costs without resorting to layoffs? nnYou 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. nnAlways 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. nnOne area that most people don’t consider is presenteeism – lost time while people are still on the clock. You may not have a productivity problem in your building, but what that usually means is you do have a problem and you just don’t know about it. The statistics are pretty eye-opening. Recent studies have found that for every 100 hours of paid productive time, companies are also paying for 2.3 hours for unproductive time. Start reviewing your staff’s productivity. nnProductivity 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.nnDisciplinary action is currently the single most used tool to control absenteeism and presenteeism. There are some alternative, more employee-friendly suggestions for dealing with this, including initiating paid leave banks (paid time off lumped together so the reasons for absence becomes irrelevant, removing discipline for legitimate illness, and offering telecommuting or flexible scheduling when appropriate. Consider creating wellness programs and offering an employee assistance program to help with mental health, financial and/or legal counseling.nnConsider every possible option before eliminating employees. Only you know your business and your team and what strategies will work best. Even small changes can reduce your overhead enough to save jobs and the message it sends to everyone is that you care and are willing to try other options first.

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