Labor Expenses Getting Out of Hand? Here Are 6 Ways SMBs Can Control the Cost

For nearly all companies, employee labor is easily their most substantial expense. While this will likely always be the case, there are some tips companies can use to lower their labor costs.

1. Create a more effective work schedule

If you ever feel like you have too many hands on deck or that your people aren't fully engaged during the day, it might not necessarily be their fault. It could be that the schedule you've created isn't effective.

Start by taking a hard look at exactly when you have people scheduled to work and why. It may be that you simply don't need five employees on hand between 2 p.m. and 5 p.m. You might be able to cut back to two employees or even one. If business doesn't get going until after lunch, open with a skeleton staff and scale things up throughout the day. Wouldn't it be amazing if your labor cost woes could all be resolved with something as simple as streamlining your employee schedule?

2. Cross-train employees

If you have highly qualified employees at your small business, it's likely they could excel in other areas. While cross-training folks involves an up-front investment, it can result in a reduced need for staffing at certain times of day. Plus, paying one employee to do a wider range of tasks - even on a sporadic basis - is more financially effective than employing two full-time staffers who each focus on one area, even after the additional training dollars are spent.

3. Make better hiring choices

When you do a better job hiring employees in the first place, ultimately you can reduce turnover, which has a direct effect on labor costs. Provide explicitly clear job descriptions, set high standards and if your gut instinct is telling you to pass on someone, listen to it. Always look for candidates with a willingness to learn, so you can continue to cross-train and ensure everyone is able to wear multiple hats.

4. Formalize your training program

A formalized onboarding program allows employees to walk away knowing exactly what their duties are and what is expected of them. Your training program should include a follow-up process that allows you to engage and learn from your new hire’s experience with joining your company.

5. Offer more benefits

Think beyond salary increases, which certainly impact your bottom line, to other perks you may offer, such as telecommuting, flexible scheduling, extra paid time off and a variety of other benefits. It's not always all about the money - there are other ways to motivate your team and keep labor costs under control.

6. Hire freelancers for short-term work

When you have short-term projects like a re-design of a website or tax needs, consider hiring a freelancer or temp instead of bringing on a full-time employee. You might pay more on recruiting up-front but you can save long-term over the cost of a traditional staffer.

What other ways can you think of to control and reduce labor costs at a small business?