3 ways to cut HR costs and improve employee engagement

Cutting HR costs

Businesses of all shapes and sizes are under constant pressure to cut costs and improve profitability. For HR departments, this challenge can feel unsurmountable as they are tasked with cutting HR costs, without reducing headcount, and boosting productivity and employee engagement.

The phrase ‘cost-cutting’ can be a time of concern for your employees and as such, can be detrimental to engagement if it isn’t handled properly. But it is entirely possible to cut HR costs and boost your employee engagement at the same time. Here’s how:

Making the right hires

While recruitment is often the first initiative that many businesses put on hold when cutting HR costs, but recruitment freezes aren’t always necessary. In fact, now is the best time to be evaluating your recruitment processes and ensuring every hire is the right hire – without the need for a recruitment freeze.

The Recruitment & Employment Confederation (REC) estimates that the cost of a failed hire at mid-manger level with a salary of £42,000 can cost a business upwards of £132,000.

Recruitment only becomes costly when it is done wrong. It forms such a crucial aspect of business growth, and as such, employee engagement and motivation can be directly impacted by poor hires. If your business is becoming a ‘revolving door’ of bad hires, this can directly affect employee morale and your employer brand.

Think about your recruitment process from end-to-end and consider the reasons why you parted ways. Did they not have the right skill set? Personality? Cultural fit? Was there something in your hiring process that overlooked a crucial aspect of the role? Take the time to critically evaluate what went wrong and how could you avoid that in the future.

Naturally, what constitutes a successful hire will vary from business to business, and from industry to industry.

It is clear that good hires can make a huge difference to employee engagement and this starts with your recruitment process. Engagement is closely linked to team building, collaboration and connections between colleagues and teammates.

Make sure your hiring process seeks out a team of committed and passionate employees that are the right cultural fit for your business.

We spend a lot of time with our colleagues and research has shown that a positive working environment directly benefits employee engagement. Management consultants, Gallup found that disengaged workers had 60% more errors or defects and 37% higher absenteeism.

Automate processes

 Inefficiencies can cost businesses up to 30% of revenue each year and the hours wasted by HR departments on processes that could be automated is eye-watering.

According to a survey by Accounting Today, senior directors of SMEs report spending almost a quarter of their time on employee-related tasks and paperwork.

Time that could be better spent focusing on more strategic initiatives that deliver a bigger business impact.

When you consider the hourly rate of pay for an HR manager, the time wasted on tasks that could be automated is truly shocking. Given the average salary of an HR manager is £43,000 in the UK – their hourly rate is around the £24 mark.

The time spent on employee on-boarding can be halved with HR software. When you think that HR managers typically spend 11 hours on-boarding each new hire, you could stand to save £132 per new hire. The cost soon stacks up when you’re hiring 10 or 15 new employees per year.

To boot, most good HR software provides HR leaders with software for candidate tracking, employee on and off-boarding, powerful people analytics to aid decision making, an employee database and performance management tools.

From an employee engagement point of view, automating HR processes will allow them to self-serve and manage their own requests for annual leave, expenses, training and much more. It provides them with access to their HR file, meaning employees can easily find the information they need and delivers a greater sense of control over their own HR experience.

Our own research found that of those HR departments that are using technology to automate their processes are enjoying reduced HR admin (72%), going paperless (56%), improved employee user experience (49%) and fewer errors (33%).

Prioritise your training programs 

Learning and development is often the first victim of most cost-cutting exercises. But providing regular employee training and mentoring can reduce HR costs in the long run and improve employee engagement.

Companies that invest in their training programs and spend over the national average of £300 per employee on L&D find that their staff retention rates rocket, with most reporting that their employees are ‘highly satisfied’.

While reduced employee turnover is clearly a by-product of investing in training, it can also help to boost productivity. This is not only where doing a specific job is concerned, but if an employee is absent or leaves, it makes it easier for a colleague to pick up their mantle if they have received the same training. This also reduces the HR costs associated with replacing an employee that has moved on from your business as internal hires can be made.

If it is unavoidable that L&D costs must be reduced, could you move some employee training online? Tools like LinkedIn Learning are great for providing employees with virtual training at a fraction of the cost of in-person courses. Or ask some of your employees to develop online tutorials, videos or guides that can be disseminated amongst employees.

Natalie Davies

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