Connecting the Dots

Six Ways to Cut HR Costs

Posted by Talent Intelligence on Mon, May 11, 2015 @ 10:05 AM

 Spending_CutsFind out successful solutions —from re-examining health care providers to reducing office risk — that can save your company some serious cash.

In today’s economy, at many organizations, each department is being asked to trim expenses — and, at the same time, demonstrate the overall value it provides to the organization.

Human resource departments are no exception. A recent Willis survey found that 16 percent of HR departments report directly to the CFO, whose primary job is often to control and reduce costs. In some cases, according to Willis, large companies have consolidated benefits administration and other HR functions and created an HR service center that operates from a central location, helping the organization save money.

If your HR department hasn’t been asked to curb expenses, proactively working to promote (and essentially, defend) effective programs and reduce spending now can help prevent a future cost-cutting request.

HR professionals can utilize a number of tactics to cut HR costs before it becomes an issue — without sacrificing employee satisfaction or threatening employee retention.

Consider the following options:

1. Price New Health Care Providers

3-28-16_blog_2.jpgShopping around to compare plan costs is just one option. Investigating inventive solutions that might reduce overall program expense — and possibly also reduce employee premiums — can have a surprising effect. For example, combining direct primary care — a system in which physicians charge a fixed monthly fee for care, instead of billing insurance providers for each visit — with a high-deductible plan can sometimes save a company 12 to 15 percent, compared to conventional health insurance, according to CNBC. Human resource professional social networking and resource site HR.com also suggests re-examining who you’re covering and contemplating major cost-saving changes, if necessary, such as potentially eliminating dental and vision plans.

2. Implement Methods to Reduce Risk

The extra effort is worthwhile: The Harvard Business Review estimates reducing significant risk — including employee accidents and office theft — could save businesses $85 billion. (View the Small Business Administration’s tips for preventing theft and fraud in the workplace for additional advice.)Gain More Insight From  Our Free Whitepapers

3. Get Creative

As discussed in a previous post (Is Salary Intelligence Everything?), work-life balance can be as strong a motivator, in many instances, as money. Consider less traditional workplace options that may affect the bottom line — such as, according to Crain’s New York Business, a 35-hour work week, which has gained popularity in many European countries and Asia and may help you avoid making layoffs. (Crain’s also suggests replacing full-time workers who leave your organization with part-time or contract employees to save money.)

4. Revisit Salary Levels

5-24-16_acp.jpgCutting salaries is obviously not a popular (or well-accepted) option. However, reviewing how what you’re currently paying employees compares to the rest of the market can help you determine a reasonable, yet affordable raise amount for each position. (And potentially cut HR costs.) Human resource managers, according to salary database source PayScale, which tracks cash compensation in Canada, the U.K. and the U.S., often opt to use a red circle policy, which involves a salary freeze for employees who are currently being paid more than the average market compensation — or are making more than the company’s highest paid employees.

5. Eliminate Unnecessary Programs

In recent years, some employers have begun cutting generally unused voluntary benefits, such as long-term care insurance, according to Monster, which has helped reduce administrative expenses. The job listing site, which services more than 40 countries, recommends distributing a survey to find out which amenities are the most unpopular. (For tips on writing a successful employee survey, read our recent Creating the Most Effective Value Proposition blog post.)

6. Consider Outsourcing Services

Nearly six out of 10 organizations have moved some in-house HR functions to an external service provider, according to the Society for Human Resource Management’s “Human Resource Outsourcing” study. The global membership organization’s research found that operation cost reduction was one of the most common reasons for outsourcing HR functions; 31 percent of organizations said it had helped them attain a cost savings.6-6-2015_blog.jpg

If you’re trying to determine what HR cost cuts to make, consider involving workers in the decision — which can encourage employee buy-in, instead of selling the change as a management mandate.

If you involve employees, the Society for Human Resource Management says it’s important to manage expectations so employees don’t end up feeling like their contributions were ignored, which can damage morale.

For tips on handling employee input, check out HR Magazine’s “Involve Your Employees in Cost Cutting” article.

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Topics: General HR Issues

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