Cutting HR Costs: Where to Look

08/20/08

Ten minutes ago, the big boss gave you a grim assignment: Cut HR costs by 10 percent across the board. After he approves your action plan, you’ll have to implement the changes companywide. How to begin? Start by examining these areas:

Recruiting and Hiring.You’ll find many good targets of opportunity for cost cutting here once you start digging. For example:

Build bridges with internship coordinators at nearby schools and colleges. You can often hire students who need to earn work credits for less than the market rate.

Hire experience. Although you’ll pay them higher wages, experienced applicants will also be more productive with less training than raw recruits. This practice can save more money in the short run than training lower-wage people from scratch.

Reduce advertising and screening expenses by recruiting through present employees. Since their reputations on the line, they’ll tend to be selective about whom they recommend. Consider paying a meaningful bounty—perhaps $500 or more—to those who help you locate hard-to-find specialists you might otherwise have to pay a recruiter an arm and a leg to find.

Take advantage of attrition. One basic option, of course, is to freeze hiring and allocate departed employees’ duties among the rest of your workforce. If that’s impractical, replacing them with part-time or temporary workers will save on benefits.

Examine How Jobs Are Designed.Ask department managers to redesign existing jobs to take advantage of:

Job sharing. In addition to reducing benefits costs, splitting one job between two part-timers lets managers tap a labor pool of retirees, stay-at-home parents with school-age children, and others who either don’t want or cannot work full-time jobs.

Increased automation. Use cost-benefit analysis to calculate the payoff of upgrading to new technology or equipment in every department from HR to building maintenance. Ask vendors’ sales reps to assess departmental activities free of charge and propose ways to consolidate or eliminate manual operations and cut out inefficiencies that reduce your bottom line. Although they have an ulterior motive, it costs you nothing to listen to a well-researched sales pitch.

Greater outsourcing. Sometimes managers do certain work in-house because “we’ve always done it that way.” If so, challenge their static thinking by having them pinpoint operations that could or should be outsourced to eliminate in-house personnel costs.

Reduce Training Costs and/or Time.
Some ways to economize in these areas include:

Use a buddy system, mentoring, or on-the-job training to minimize or eliminate outside training expenses.Compress required training time if you can do so without compromising performance or overwhelming new hires with information. One source for ideas is recent hires themselves, who should produce some insightful and cost-saving suggestions with a little encouragement.

Get your money’s worth from external trainers and consultants. Have them back up claims of success with hard numbers; confirm this information by contacting clients they’ve worked with before.

Investigate Tax Credits and Other Government Assistance.
Your company may qualify for federal income tax incentives through the Work Opportunity Tax Credit (WOTC) and Welfare-to-Work (WTW) programs (both of which are up for Congressional reauthorization), the U.S. Department of Housing and Urban Development’s Empowerment Zone and Enterprise Community programs, and Enterprise Zone incentives.