When it comes to your organization, labor costs can add up fast. Unfortunately, they often get so high that companies are forced to lay off employees  and shrink bloated departments. But what if there were a different way?

6 Tips for reducing labor costs

Clearly the cost of hiring, training, and retaining employees is high. Thankfully there are some tried and true strategies you can use to lower the overall cost without negatively affecting output. Let’s take a look at a few specific tips and techniques: 

1. Cross-train employees 

Employees who specialize in certain tasks and skills generally cost employers more. On the one hand, a specialized employee might be worth the premium because of the value she brings to her position. On the other hand, too many specialized employees can drive up payroll costs and limit your company’s ability to handle different needs.

In other words, you’re teaching employees how to take on new responsibilities that aren’t directly related to their core responsibilities.

For example, you may choose to cross-train your product development team members to work in your call center. The short-term benefit is that you can increase your number of call center employees when you’re experiencing a surge in demand. The big picture benefit is that your product developers understand customer pain points and can use this acquired knowledge to create better products and services in the future.

2. Switch to four-day workweeks

Every day that your company is open is another day that you have to spend money on operational costs. One practical way to save money and improve employee satisfaction is to switch to a four-day workweek. If employees normally work five 8-hour days , a simple switch to four 10-hour days could provide everyone with a three-day weekend. You may even find that you get more productivity out of your employees this way.

3. Use the right technology

Much of the recurring non-salary costs associated with keeping employees going are related to technology. All of the devices, hardware, software, apps and programs employees need to do their jobs efficiently can cost a significant amount of money if you aren’t careful. If you can find a way to reduce these costs, you’ll stand to save a considerable chunk of change.

4. Outsource when possible

When demand increases and companies need help, the natural inclination is to post a job opening and look for a full-time employee. What you’re probably forgetting is that outsourcing is an option. According to research, a company can save asc much as 60% in operational costs by outsourcing a job to a qualified professional. That’s a tremendous amount that could save your business tens of thousands of dollars per year.

The key is to know when to outsource. Certain jobs make more sense than others. For example, most companies wouldn’t want to outsource core tasks like product development and sales. You want people who know your company from the inside-out to handle these responsibilities. However, it can be cost effective to outsource things like call center answering, consumer research, administrative tasks and even SEO and digital marketing.

5. Invest in better employee retention 

“Did you know that high employee turnover can be costly for your small business? The cost of turnover can be attributed to several things, including the loss of productivity when a position is vacant, the cost to hire and train a new worker and the knowledge gap you’ll face until your new employee is up to speed,” . “Fortunately, there are steps you and your company can take to help keep quality employees.”

BMO Harris Bank points out six specific ways companies can improve employee retention rates. They are as follows: (1) offer competitive salary and benefits; (2) clearly define job description and goals; (3) invest in training and continuing education; (4) make sure employees see opportunities for advancement; (5) recognize employees for a job well done; and (6) encourage two-way communication. 

6. Promote from within

There are plenty of things you can to raise your employee retention rate, but there will always be vacancies here and there. That’s just the nature of business. How you handle these openings could drastically lower or increase your labor costs. One cost-effective strategy is to promote from within whenever possible.

For one, the employee already understands company culture and doesn’t have to go through an adjustment period. Secondly, it encourages other employees to work harder so that they might eventually have the same opportunities for advancement. This boost in morale typically leads to greater output per employee.

While you won’t always have someone who is capable of being promoted, keep your eyes out for future replacements and let employees know that they’ll always be given a fair chance to move up.