Good employees are crucial to the long-term success of a company. In times of crisis, however, it may be necessary to reduce staff costs in order to survive. To show you how best to approach this and where you can make savings, we've put together a few tips for you.
When companies are looking to make savings, their attention frequently turns to staff costs. This shouldn't come as a surprise, because at 30% to 40%, staff costs are usually the largest cost item for a company. In the service sector, they can even exceed 80%. Staff costs are made up of direct and indirect costs.
Direct staff costs include:
- The salary itself
- Employer's social insurance contributions
- Training costs
- Voluntary benefits such as the company pension scheme
Indirect staff costs consist of:
- Renting of business premises
- Equipment and tools
- Energy costs
But before blindly taking action, you need to make a plan. Cost-cutting measures should be given careful consideration and weighed against their possible consequences.
Before you start to cut corners and eliminate every seemingly unnecessary cost item, you should look at an overview of the total costs. You need to work out staff costs as a proportion of total costs, identify what direct and indirect staff costs there are and how high they are.
Once you know the total staff costs, you can consider to what extent savings are necessary and possible. However, it's important to be aware that such measures will be met with resistance from employees – especially if direct staff costs are to be reduced.
It therefore makes sense to get legal advice before announcing the plan to the workforce. Not only does this provide legal certainty, it also gives you arguments for presenting an appropriate response to the inevitable objections of those affected.
The less the perceived detriment for employees, the easier it is to dispel concerns. For example, training can be scheduled at weekends in order to prevent downtime. Reimbursement of the costs can also be agreed if employees leave the company within a specified period after the training.
The increase in the number of people working from home has made it possible to reduce workplace costs. Because not everyone works permanently on site, employees can easily coordinate the sharing of an office space.
If these measures aren't enough, the next step should be to compensate overtime with time off instead of money. However, this must be done in accordance with the employment contract and the company agreements.
Next, you might consider reducing voluntary benefits such as the company pension scheme, meal allowances, childcare facilities or employee discounts. However, this is where it starts to get dangerous, because these cuts can have a negative impact on employer branding and employee motivation.
If all that isn't enough, salaries can also be reduced if necessary. However, this is only possible if the employees concerned agree – so you need to have good arguments prepared.
The last step in escalation is termination. However, because of its hugely damaging effect on the motivation of the remaining employees, it should only be used if the survival of the company is at stake.
For companies that find themselves in a situation where their very existence is under threat, there is still the possibility of applying for short-time work for the workforce, in which case the state will partly cover the loss of earnings. However, this only applies in certain situations such an economic crisis or a pandemic.
Ideally, you should consider staff costs when hiring new staff to ensure that they don't become an issue in the first place. For example, weekly minimum and maximum working hours can be agreed, within which employees can work flexibly depending on the order situation.
Temporary increases in demand for staff can be met by external providers, who can not only provide staff at short notice, but also handle the selection process and, if necessary, replace unsuitable staff. If experts are required on a short-term basis, it might be worth working directly with freelancers.
Whatever action you take, be careful and, above all, don't overdo the cost-cutting or you may lose good, qualified and motivated people. Remember that in Switzerland we currently have an employee's market and finding suitable talent isn't easy.
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