How To Manage Increase In Labour Cost
The inflation is on rising day by day. All the businesses are struggling to cope up with the increase in labor costs. Labor cost is a critical cost element which accounts for the major cost of production. Around the globe, the nations have legal regulations regarding minimum wages and other benefits which businesses are expected to follow without fail. These cannot be reduced. So, we have to look for other ways to reduce labor cost. Read on to know the other ways:
Technology: Automation is a one-time investment. It is a permanent and problem free solution. Hence find out which functions of your business can be automated. The more human intervention is reduced, the more you can cut on labor costs.
Turnover: When you try to cut on labor costs, the resulting labor turnover will increase the cost further. Hence instead of measures like extended working hours, lowered compensation etc. try offering flexibility in timings with reduced incentives. This will reduce turnover.
Performance-based pay: Not all apps perform like the bitcoin code software. The profit they earn for you is huge. Similarly, not all workers add value to your company. Then why pay the same salary to all? This will result in huge labor costs. Instead of offering fixed wages, offer more performance linked incentives and allowances. This will reduce your labor costs. The best performing resources will stay happy as they are rewarded more.
Cross training: Over a period of time, employees continue to do the same work without learning new skills. Due to this, during a shortage of labor due to absence, you may not be in a position to divert resources from one task to another. Instead, you continue to recruit people in spite of having idle resources. Cleverly shuffle the functions of people periodically so that everyone gets trained in all the tasks. That way you need not to hire people. Instead, you can optimize the existing labor resources.
Giving non-monetary benefits: Instead of giving monetary packages more, compensate with non-monetary benefits like sponsoring free training, medical check-ups etc. This is less costly.
Outsourcing: Do not incur labor costs on taking up the non-core functions. Instead simply outsource them. That way your labor cost will be drastically lowered.
Reduce duplication and improve coordination: Among various departments of your company check if the same task is done twice. If so, eliminate duplication. Only good coordination will ensure avoiding wastage of labor resources.
Use the above tips and reduce mounting labor costs in your business.