Human resource cost optimization is a critical concern for HR leaders. Business owners find it hard to anticipate elevated and unanticipated costs as part of the human resource budget. Let us look at prominent HR costs to optimize them.
Recruitment – Recruiting the right (or wrong) person impacts the company. While recruiting, you must consider the cost to the company, the recruitment expenses, bonuses, office space, equipment, and the time to onboard new employees. Companies must record expenditure to speculate on future ones.
Training and development – Training and reskilling are essential to developing employees. The combined experience and skills can grow the business. However, the wrong type of training or an overly complex form of training could elevate the cost.
HR administration – Most companies are still following archaic ways to record and update staff data. It holds up business operations and demotivates employees, which translates to hefty fees. HR managers could use the time on some critical admin tasks instead.
Employee retention – The cost of replacing mid-level employees is 150% of their annual salary, which jumps to 400% of the salary for specialized workers. Many companies boost salaries and benefits to attract talent and reduce turnover, an expensive option.
Employee benefits – 51% of companies say they are concerned about the rising employee benefits costs. However, when appropriately implemented, it can minimize staff turnover and attract talented candidates.
Optimizing HR Costs
Some HR leaders will be tempted to follow the knee-jerk reactions of cutting costs, but often prematurely and unwisely, putting strategy-driven ideas to the backburner. Instead, HR could focus on cost optimization strategies to manage costs.
1. Hire and retain star performers
An average company spends USD 4,129 per hire and takes 42 days to fill a vacancy. A bad hire can cost ten times that of an outgoing employee. The training cost and low productivity could drive up the cost. Companies can leverage AI, RPA, social media, and others to hire the best fit, onboard, and manage and retain employees.
2. Track, monitor, and assess current processes
Tracking, monitoring, and assessing current processes can help identify inaccuracies. For example, time and labor cost, leave and absences, people-per-project and people-per-task costs are key performance indicators (KPIs) to track.
3. Prioritize training and mentorship
Investments in training increase productivity and create an internal succession pipeline, helping productivity remain constant whether the employee completed the tasks, absent from work, or a new employee has taken the place of those who left.
4. Standardize processes
When HR incorporates typical HR aspects such as time tracking, pay calculation, vacation, and leaves on configurable AI-based interfaces, it creates a strong, consistent, transparent, and standardized system that supports policy implementation.
5. Automate repetitive processes
Despite the advances in RPA, chatbots, AI, and NLP, companies miss about 50% of automation opportunities on average. HR RPA automates repetitive tasks in recruitments, payroll, learning, and many HR processes, reducing the cost by one-third. In addition, companies can upskill/reskill employees displaced by automation to take up administration and business-related tasks.
6. Integrate systems
Though enterprises implement automation, they see a decent amount of manual input. AI-based software integrates all areas of business that include scheduling, payroll, time, and attendance.
7. Optimize employee performance
HR must optimize employee performance by providing them with tools and knowledge to effectively self-manage, with timesheet tools being affordable and accessible options. Through these tools, employees can manage their tasks, contributing to organizational productivity, spend time with customers to boost reputation and satisfy them.
8. Promote talent mobility
Organizations have ignored the value of talent mobility and continue to hire external talent expensively, which takes 18% more compensation. Besides, external hires are 61% more likely to be fired from their new jobs than upskilling or promoting from within the company due to the time it takes them to navigate, adjust to the culture, and learn the ropes.
Applying AI-Based Workforce Planning Model
Enterprises must be agile. However, due to the over-reliance on spreadsheets, time constraints, ineffective communication channels, and many stakeholders, workforce management suffers. Though HR has become data-driven, HR managers still track workforce plans using the position-based spreadsheets generated by Finance POS.
Traditional analytics uses an army of people who can extract only a little information that takes weeks to accomplish. It is expensive, makes businesses slow to react to shifting strategies and market changes. Besides, the workforce plan collapses when the HR hires for that position.
HR must move to an AI-based continuous planning model that enables precise tracking of team-level changes and making budget tracking easier. When workforce planners access the current budget or forecast from Finance, they can see the upper limits on headcount and make data-driven decisions before problems arise.
Draup for Talent is a talent intelligence and workforce planning tool that eliminates challenges and makes planning fact-based, agile, and collaborative. Companies can leverage HR and business data to enable right-sizing the workforce, forecast accurately, and align finance and people initiatives.