The service industry has been growing at a steady rate, as consumers look for expertise, professionalism and need to outsource non-core functions of a business.
Firms such as those in PR, accounting, insurance, real estate, human resource and security industry are judged on their service delivery and their ability to execute.
Human capital is known to be the biggest asset to organizations and it’s equally the biggest cost. Staff expectations versus staff costs are things that must be juggled carefully.
How do you manage staff cost?
Review your payroll
Salaries and wages are known to move upwards despite changes in the market and financial situation of a company. Payroll is the most significant cost for a service business as it’s an occurring expenditure.
There is a need to determine if your company is on the right track or you are setting your business up to fail. Compare the ratio of your payroll expenses to gross revenue in view of the overall profitability of the company. Once this has been done, payroll as a percent of gross revenue should fall within 30-40% of gross revenue.
Anything above 40% means that your company is in the red zone and you need to review it and come up with new strategies immediately.
Invest in employees cross-training
Working towards reducing staff cost, there is need to cross-train your workforce. Having an employee who possesses more than one skill in a related area is an added advantage. Having a workforce with crosscutting skills will enable you to make changes easily such as staff restructuring without affecting your service delivery.
For example, Having a sales person who has training and/or experience in customer care and administrative work, will be ideal.
For example, when working to cross-train staff, you can train your IT technician in digital marketing which is a soft skill that can be learned. They will be able to support the IT functions as well as the digital marketing at no extra cost, rather than having two employees.
There are two ways to go about this, one; convert part of your employee’s salaries and wages into commissions upon achieving a certain target. Pay your employees against an accompanying revenue to ensure you are not paying them more than they are bringing in.
Two; convert the employee benefits into cost-sharing plans. For example, reduce the cost of medical cover with deductibles being covered by you and your employees. Look out for those other deductibles that you can have your employees carry the weight.
Technology has ensured that most of our work can easily be automated and they require occasional use or maintenance. Depending on the nature of your business, you can outsource some of your specialized needs for occasional maintenance. For example, services like IT support, Accounting and HR are functions you can outsource to ensure you have a lean manageable team.
It is expensive to maintain these professionals full time on salaries and benefits while you can outsource the services for half of their salary a month to an independent firm. Kenya as a growing economy has so many upcoming businesses which you can leverage to reduce staff cost.
Curb employee turnover
High employee turnover is a cost that will put a dent to your staff cost as this will increase your operations. The cost of recruiting and training of new employees should always be kept on the down low. Strive to maintain a stable employee core as its key to effective cost-cutting.
Staff cost-cutting is a delicate affair and you will require being diligent in your implementation. Communication with your employees is key, notify them of your intentions to avoid speculations and destructive rumors among your employees.
The Writer is a Communications Officer at Corporate Staffing Services. Email: email@example.com