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Ask Ed

Ask Ed (Last Updated On: November 10, 2016)

Question
I find that employee costs are way too high. What are some cost reduction methods?

 

Answer
Employers should be continually looking for efficiencies and ensuring the business is sustainable for years to come. Incurring costs are a fact of life when running a business and labour costs are a significant part of that.

In many industries, there are savings to be made by assessing and making changes to when staff work. Rostering high cost employees at times where no, or low penalties apply, and vice versa for normally low cost employees (such as juniors or low skilled employees), can make a significant difference. In addition, particular industries have quirks that can be used to the employers advantage. For example, in the hair and beauty industry casual employees are paid the same rate as permanent employees on Saturdays, making it far more cost effective to engage casuals on that day.

Most Awards and agreements will include overtime penalties that apply after completing 38 hours a week, after a certain number of hours in a day or outside a set span of hours. Having employees work over these hours can result in significantly higher rates being payable. There are various options that employers can use to limit these costs including:

  • engage more staff to perform less hours
  • offer the hours to types of employees excluded from the penalty (for example casuals in some Awards are not entitled to overtime payments but make sure you check your Award)
  • have flat rate or salaried employees that are paid well in excess of an award rate work such hours

While casual employment is very flexible, employers will pay a premium for it, meaning hiring or scheduling all casual or all permanent employees may not be the most cost effective option. In addition, other types of employment exist, such as apprenticeships and traineeships that can offer employers low cost labour options in return for the employee learning new skills and gain qualifications on the job.

There are many areas that are not considered to be labour costs, but employees directly impact. It is important that employees perform work in a cost-effective and efficient manner. It could be as simple as highlighting these areas to employees and enforcing they take extra care during their normal duties by avoiding unnecessary or extravagant use of services, time, energy, etc. The following are some areas where due care can be exercised.

  • The handling of machines, equipment and stock
  • Turning off any unnecessary lighting and heating
  • Printing – Double sided and scrap paper can assist in reducing costs
  • Ensuring staff arrive on time, are productive and adhere to break times

Whilst each industry and employer are different, there are options available to all. If you would like any further advice on the above cost reduction options, or any specific to your business, call us on 1300 651 415. If you have a curly question you would like to ask me click here.

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