While generating profits is a priority for every company, saving resources is equally important. Discover proven methods to reduce costs in human resource management that you can successfully implement in your company.
Article Outline:
1. How much does human resource management cost a company?
The cost of human resource management for a company can vary, and it depends on several factors, including:
Less obvious factors can also include the nature of the business and the industry in which it operates. For example, a small company that employs highly skilled specialists who receive high salaries and valuable benefits will have significantly higher HR costs compared to a company of the same size that does not employ such specialists.
Location can also be an interesting factor. If your company is located in a small town and needs to attract specialists from other places, your HR costs will be higher due to relocation expenses.
HR costs in a company encompass various expenses related to managing human resources. These costs can be divided into several subgroups commonly found in organizations, including:
In large corporations, especially those with a global presence, human resource management costs can reach several percent, or even up to 30%, of the total operational budget. Small and medium-sized companies may have lower costs, but it’s important to remember that their budgets are also lower accordingly.
How can a company optimize HR costs?
Some several strategies and solutions can help a company optimize HR costs. Let’s start with the basics.
Data analysis:
As a business owner, you probably know that management should be based on data rather than intuition. Collect and analyze all possible information related to human resource management. This way, you will identify areas that may require improvement or streamlining, which will contribute to cost reduction.
Outsourcing:
Many companies use external service providers specializing in human resource management. Outsourcing certain processes and tasks can help reduce HR headcount costs.
Absence prevention:
While you can’t completely prevent employee illnesses, you can try to reduce the absenteeism rate. Is it flu season? Perhaps it’s worth investing in vaccines for the team. Ozone treatment for office spaces, disinfection of commonly used surfaces, and promoting workplace hygiene, such as proper ventilation, can help prevent absences. Another aspect of preventing absences is allowing employees to talk to a psychologist if they are struggling at work or dealing with a stressful situation. Investing in employee health can reduce the costs of organizing replacements for sick employees.
Employee training:
When a company invests in training and professional development for its employees, they feel valued, work more efficiently, and are more motivated. This automatically reduces turnover rates and helps lower HR costs.
Process automation:
Automating HR processes helps increase the efficiency of HR-related activities, from the recruitment process and employee onboarding to time tracking and salary calculations. Modern HR software can be utilized for automation purposes.
These are just a few examples of how a company can optimize HR costs. The specific strategies and solutions will depend on each organisation’s unique circumstances and needs.
7 ways to reduce HR costs through HR software
And so we come to the heart of the matter – how does HR software help reduce company costs? Let’s explore 7 out of many ways.
Electronic employee documentation:
HR software enables convenient management of employee documentation. Since the requirement for paper documentation has been eliminated, you can easily digitize all employee files. Gather data in one database instead of dozens of file boxes. Save on printing, storage, and archiving costs.
Employee self-service:
Your HR department has a lot on their plate, and the line of employees with various requests seems never-ending. Take advantage of the popular feature of HR software, which is an HR portal where employees can independently:
Process integration:
If you decide to implement HR software in your company, such as an HRM system, you can integrate multiple HR areas into a single tool. This will provide data integration and streamlined process management and reduce the cost of maintaining different HR tools – license purchase, implementation cost, and maintenance cost.
Automation of recruitment processes:
HR software can be used at every stage of the recruitment process. It helps streamline, automate, and accelerate the process, resulting in faster selection of suitable candidates and filling vacancies. Candidate tests, meeting calendars, automated correspondence, and the use of various templates all contribute to a more efficient process and resource savings for the company.
Efficient time and payroll management:
With HR software, you can more effectively track the working hours of each team member and calculate salaries precisely. Everything is done automatically, reducing the risk of incorrect calculations and potential financial penalties resulting from manual data processing.
HR data reporting and analysis:
If you ask an HR specialist to prepare a report on a specific HR process, they will certainly do it. They will put in a lot of effort to ensure the report is accurate and comprehensive. HR software can generate the same report flawlessly and much faster. Instead of incurring overtime costs and having exhausted specialists, delegate data processing and analysis to the software. The specialists, freed from bureaucracy, will work more efficiently.
As technology advances, the list of ways HR software can reduce HR costs continues to grow. So let automation and integration become your most effective recipe for savings, greater efficiency, and company competitiveness.
