The hidden costs of labor
Businesses across the country are now trying to restructure and recover from the impact of COVID-19. Many are looking for ways to cut costs and improve their practices and flows, not just to survive, but to actually emerge stronger from the crisis by finding new ways of working.
The pandemic has led many organizations to implement new ways of working, accelerating the shift to a more digital way of working and to more remote working.
The World Economic Forum recently examined how new ways of working have helped many companies to become more flexible and more able to respond to external challenges, making it the new normal for them.
However, there are industries - the service sector is one - where digitization and teleworking cannot replace large parts of what they deliver. Instead, they have had to work on other ways to cut costs without compromising the quality of their services.
Having effective leadership and knowledgeable management has become even more important today. For many businesses with small margins, there is no room for time-consuming adventures or unforeseen expenses.
These businesses need to examine their operations to see what measures they can take to reduce both costs and time.
PWC and ADP recently published a report "Exposing the Hidden Cost of Payroll and HR Administration" This study explains some of the methods that companies can use to save up to 75% of their costs for administering staff.
The study by PWC shows that entrepreneurs underestimate the cost of owning and running a business. These costs can be expressed in terms of how much time and money is spent on employee payroll and personnel administration. The costs can be very high as up to 63% can be hidden costs, as they include a number of interfaces and processes that can be difficult to see when evaluating and therefore remain an unnecessary financial burden. The visible costs are much easier to control as they show the costs of working hours performed against a real hourly cost for work performed.
The above-mentioned report has inspired Gigger to create a calculator that allows business owners to calculate how much they can save by outsourcing their human resources management to a company that specializes in this. The calculator is available here
Some companies try to streamline their administration by using external integrated software to manage their HR administration. This can be a time and cost saving measure as fewer people need to be involved and good technology can make the work easier.
However, the PWR study shows that by doing this you spend on average 21% more money per payroll than before as you also need to include the costs of:
Maintenance of the software
Training activities for staff to use the software
Customization costs to make the software fit your business
PWC clearly shows that you should not handle this yourself, either with your own HR staff or with purchased software. The most cost-effective way is to use external suppliers who can handle this.
The services you should buy include:
Matchmaking and recruitment
Salary calculation and payment
Human resources management
The advantage of delegating most human resources issues to a specialized company is that it saves time and money.Time spent in various recruitment processes is significantly reduced with match-making systems that ensure companies get the most suitable people as employees. Key personnel can spend their time on more productive things than instructing and training new hires. The tools also allow companies to skip the expensive staffing and recruitment agencies that charge high fees for their services.
The more advanced gig companies offer staffing solutions that give companies their own platform where they can create their own staff pools of possible candidates for longer or shorter assignments. This also makes it easier to get the right staff in emergency situations. One of the benefits of having a large pool of contingent workers is that you can always keep your key staff working on your core business and leave the extra work to gig workers or freelance hourly workers.
An important service also offered is scheduling. Professional scheduling, especially in health care and services, allows work to be better planned and also to be carried out more efficiently with fewer employees.
There are a large number of companies on the market offering administrative tools to individuals and businesses. Most organizations or small businesses usually do not need all the features offered. If you can choose which tools you want to pay for, it takes quite a lot of time and knowledge to choose and pay for exactly what you need.
The dramatic start of the 2020s has forced many industries and companies to restructure their operations at a speed that was unexpected for all involved. To sustain growth, everyone needs to adopt new ways of working that allow for a high degree of flexibility. For the few who can digitize their way out of the challenges, it is not so difficult, for others it is more complex. But fortunately, technological progress has enabled all businesses to benefit from it now and in the future market.