In an increasingly volatile business environment, cost cutting is an important mandate for all functions, including HR. According to Bloomberg's HR Department Benchmarks and Analysis 2017 report, costs related to benefits, recruitment, training, and compensation account for about 60% of a HR department's total annual budget. Organizations are increasingly realizing that laying off employees is not the answer to cost containment as the adverse impact from reducing the headcount far outweighs the short-term savings it generates. Instead, CHROs are increasingly collaborating with CFOs and CTOs to cut costs and improve efficiencies.

Here are five tactical ways HR leaders can reduce costs without impacting the headcount.

Leverage HR technology: Thanks to the availability of talent related data, the days of gut-based decision making are giving way to decisions based on robust data analytics to forecast hiring requirements or detect loopholes in hiring processes. As the usage of data science and analytics increases in the HR function, the precision in understanding talent challenges impacting business growth are improving. Here’s a case in point. A leading Indian life insurer was facing over 60% annual frontline sales (FLS) attrition, leading in bad hire costs of more than $10,000 per employee. The organization resorted to using a predictive model for its frontline sales hiring by evaluating data of past and current employees across different phases. The result: the organization now expects to reduce 20% of its attrition, in turn, reducing costs.

Outsource routine high volume tasks: A study by The Society for Human Resource Management estimates that the average company spends about $4,100 on each new hire, and takes about 42 days to find the right candidate. Outsourcing such routine and high volume tasks can help in reducing costs to a great extent.  What’s more, 63% of HR organizations that rely on an HR partner of a temporary staffing expert to handle at least one program, have been able to focus more on employee engagement activities.

Improve onboarding practices: The first 90 days are the most crucial period for new hires as well as employers. This is the time when the company introduces its culture, the new hire’s responsibilities, specific goals, and how their contribution adds up to the company’s growth.  An excellent way to increase efficiency in the onboarding cycle is to include an element of online intervention. 39% of respondents in a Kronos and Human Capital Institute survey say they do not have the right technology to reduce administrative errors, ensure consistency, and improve accountability during onboarding. Enabling new hires to fill out forms or submit documents online can free up HR team members’ time while reducing costs around space and other physical infrastructure.

Restructure processes through automation: A thorough dipstick on all HR jobs and processes can be helpful. Despite the surge in digitization, some transactional aspects of HR – like the payroll - use outdated manual processes or technologies that are decades old. Integrating such operations with new age intuitive technologies can save both time and money, apart from centralizing HR functionalities. Another example could be excessive use of pen and paper in day to day operations, with the cost of printing and paperwork quickly adding up to a sizeable percentage of HR costs. Digitizing administrative tasks that involve paperwork can help in reducing cost and increasing efficiency. According to Hewitt Associates, organizations can save 10-20% in overall benefits and HR delivery costs using HR process automation.

Find health and wellness programs that are smart: The best way to design a smart employee wellness program is to involve the employees in deciding what they need. This optimizes the HR budget by keeping unnecessary and poorly utilized programs out of compensation packages. MaidPro, a house-cleaning and maid service in Boston, is a good example here. Instead of offering a blanket wellness program, the company offers customized ergonomics training for problems such as backache to its employees, right in its headquarters. Apart from reducing cost, this step has also improved the level of engagement amongst its employees.

More often than not, change initiatives aimed at reducing costs spark a sense of fear among employees. The ambiguity around how such measures might impact them can give rise to unfounded rumors, leading to employees looking for other job opportunities and a dip in employee morale. Including employees at all levels in cost cutting initiatives through transparent and constant communication can go a long way in not only easing employee concerns but also increasing engagement.


about the author
yashab giri new
yashab giri new

yeshab giri

chief commercial officer - staffing & RT professionals

yeshab is responsible for leading the development and expansion of randstad India’s value added staffing services which currently encompass field force, engineering and technology roles.