8 Simple Ways to Reduce Labour Costs | Accountant Adelaide

8 Simple Ways to Reduce Labour Costs

8 Simple Ways to Reduce Labour Costs

reduce labour costs

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Whether you are an SME or a well-established company, labour is one of the most expensive expenses you have to deal with. Surprisingly, paying a salary is not the only cost you incur in hiring employees. The true cost of having an employee can be higher than you expected.

Thankfully, there are several measures you could put in place to help you lower your labour costs. Here are eight ways of cutting down these costs.

What are Your Levels of Compensation?

Company systems have been set in such a way that labour costs are the only ones that keep increasing, even when other factors remain constant. This is due to wage increment per year in many organisations. Consequently, it may lead to employees being paid more than what is required for their position at a particular time.

To help cover this gap, you can reward them in tokens to make sure they are not getting more than they deserve. Also, you could consider hiring experienced accountants such as The Kalculators, to help you look into your books of accounts for unnecessary labour expenses.

Hire Cross-talented Employees

One of the pieces of advice you will get from an accountant looking to help you cut down on costs, is that you should consider having cross-talented employees instead of getting specialists in specific departments. This means one person can do a job for two people and still get paid one employee’s salary.

Though you can consider paying cross-talented employees more, it is still cheaper than paying two people. In most cases, the amount will still not double, hence controlling your labour costs. Alternatively, you can choose to train your current employees to take on more tasks instead of hiring new ones. Consider looking into ways to recruit and retain talent more effectively.

Adjust Working Hours

Another easy yet unseen way of reducing labour costs is adjusting the regular working hours to less time in the office. For example, instead of having employees at work five days a week during the standard 8 hours’ period, you can decide to change it to four days a week for ten hours with a lesser salary.

Surprisingly, many employees will take the change positively, especially those who would love to have more free time. This will also mean getting employees to finish their projects early, thus saving time as a company at large.

Make Use of Part-Time Workers

As a start-up company, you do not have to get full-time employees. During the early stages of a business, most founders do almost all the work. This is because there isn’t much to do and if there is, then there are part-time workers who more cost-effective compared to a full-time employee.

A full-time employee may end up getting paid for idle time, more so when there isn’t much to be done in the office. You can as well utilise young talents looking for internship positions for minimum wage or hire them at entry levels.

Commissions versus Salaries

Salaries are fixed, whether or not an employee is productive. This means that you are obligated to pay your employees their salaries even when you have not made any sales in a given month. Such a setting offers lazy employees a hiding place, consequently hurting the profitability of your business.

To solve this issue, you could start an employee on payment-by-commission for a while before you are assured of their productivity. After that, you could absorb them on more permanent terms and pay them a salary in relation to the guide on minimum wages. This way, you secure your business from paying unproductive workers as you reduce labour costs.

Make Use of Technology

In an era where anything can be handled through specialised software, you can always find a way of cutting labour costs by utilising the technology at your display. For example, there are DIY types of software for accounting.

You might need a professional accountant to verify your books of accounts before paying taxes, but that one-off payment is cheaper than hiring a regular accountant. Alternatively, you could train your employees to use automated systems, then reduce their working hours as explained in the third point.

However, it is essential to consider the quality of your output when moving from manual to automatic ways of handling a task. Make sure you test the recommended systems before you migrate entirely.

Re-Organise Your Departments

When a company grows, the management may decide to make use of departments to help run the company. This makes things easier to manage, but it might also come with unnecessary management costs. For example, you might find two departments handling somewhat similar tasks.

To stop this from happening, you need to thoroughly organise your departments in such a way that only the important ones are formed. An employee, if cross-talented, can be in two departments to avoid excess workers. Alternatively, unless it requires more than three employees, do not call it a department.

Overtime versus New Employees

One last way of making sure that your labour costs remain in check is by utilising the current employees and paying overtime compensations instead of having a new employee. This is cheaper, and also you avoid the cost of training new employees every time an extra-hand is needed.

It also applies to a young CEO who knows for sure; adding another person to their payroll is not the best move at the moment. Being the vision bearer, you need to have the courage to press on into the night before you can make enough to pay a helping hand.

According to a report in 2017, the UK has been one of the best places for micro-business to thrive, employing over 4 million people. This means that with the right systems, your business has the potential to grow and get other people on board. However, growth takes time, and you need to control your labour costs as much as possible to keep a regular graph.


Remember, part of growing and managing a business is looking for ways to maximise your profits. If labour costs are not well maintained, they can be the cause of losses where you could have harvested better benefits. Cutting labour costs and utilising cheaper tech-inspired resources eventually means a well-managed business.

Robert Romero

Robert Romero, after being a part of the marketing industry for several years, he took the opportunity to pursue blogging full time and also push his finances in the right direction.

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