Why HR fails to reduce labour costs

HR departments are under constant pressure to increase efficiencies whilst reducing costs. So, how do you achieve this?

The challenge

HR departments are under constant pressure to increase efficiencies whilst reducing costs.

So, how do you achieve this?

It’s about how and where you reduce costs.

Most HR departments struggle with organisational under-resourcing. Further cuts only result in lower engagement, increased compliance risk and higher costs. The answer is to examine the largest cost to any business: labour. Yet, HR traditionally leaves this to others.

Modern HR systems now deliver functionality that enables managers to control labour costs and avoid potential overruns before they occur. Wastage can be reduced by up to 5% — enough to make any business leader smile.

Traditional HR management systems consist of a number of disparate databases, each focussing on different aspects of employee management: payroll software to pay people; a rostering system for optimisation; a talent management system for retention. They hold the information needed to manage costs, capability and risk. Businesses using this model must rely on interfaces and manual data manipulation to unlock the powerful data required to drive key business decisions. Many organisations buy in expertise just to understand what the data is telling them.

Business leaders are being asked to deliver on major transformation priorities. CFOs and HR managers are focused on improving scalability in their finance and HR processes, enhancing data integrity and operational visibility for the business, and sustaining employee engagement. Other parts of the business demand accurate, up-to-the-moment data to keep budgets under control.

Reducing labour costs a priority

Smart organisations with significant labour costs are modernising critical parts of their financial and HR data supply chain. These companies are implementing next-generation business support platforms to empower their people with the tools to control labour costs, quality and wastage.

Internal collaboration

Managing resources, tasks and costs (then retrospectively reporting results) is no longer the sole domain of Operations. Nor should Finance simply report on past project and labour costs. By then, it’s too late to change what happened. Modern HR systems combine all of the data required to support ‘best-cost’ rostering. Information streams back, informing managers how costs are tracking as they are incurred. Managers now truly control labour costs. Potential labour wastage and compliance breaches are notified in advance, reducing financial loss and the potential for harm.

Make your CEO smile

Switching to a single-source HR management system provides businesses with an instantaneous view of labour costs and people capability. Data is constantly updated and integration between modules is seamless. There is no need to wait for key processes to run (such as a monthly payroll) before critical data reveals itself. Budget blow-outs are avoided, managers are proactive not reactive. Efficiencies are realised because the burden of employee HR data management is removed. HR now becomes the foundation to achieve significant labour cost reductions while gaining the benefits of new technology.

A guide to change management
in Local Government