How to Control Small Business Payroll Costs

In America, small businesses employ large number of employees. During the recession, many sectors are hit hard and need to cut back in every aspect to survive. Payroll costs can be significant if many benefits are offered. In order to survive through hard times, controlling payroll costs is essential. It should be carefully executed to benefit the business and not hurt the employees significantly.

Difficulty: Moderate

Instructions

1. Many small businesses use layoffs as a means to control payroll costs. However, it should only be used as a last resort option when the situation is dire. Its effects are immediate and employers will save tons of money right away. It will free the company of any extra personnel that you can do without.

2. Furlough is another popular option that is very effective at controlling payroll costs. It should be used when business is slower than usual due to poor economic conditions. As the owner of the company or manager, you should determine the percent of furlough days. Here are some furlough percentage you can use 5% (1 day out of a month), 10% (2 days out of a month) and 15% (3 days out of a month). This is actually a very good option for employers because it controls payroll costs without losing any of your employees. It will also control operating costs as well.

3. You can also control payroll costs through cutting or reducing benefits offered. To attract high quality employees, many employers offer different benefit packages upon hiring. These can include 401k matching, health care and bonuses at the end of the year. All these benefits cost the employer significant amount of money. Cutting some of the matching for 401k can save lots of money only when you have 20 or more employees. If you make your employees contribute more to health care, you can save significant money because health care is relatively expensive. Since business is slow, not giving bonuses to your employees is understandable. Instead, you can give rewards based on performance. That way, it will encourage your employees to work more effectively.

4. When your full time employees leave the company and you need replacement, you should replace them with part time employees. Part time employees work less hours per week which is ideal for the current financial situation. Many employer use the term to justify for not giving paid vacation time, benefits and other perks associated with full time employees. This is a great way to get the work done and pay less money for it.