How to Keep a Payroll Low
Payroll is undoubtedly one of the largest expenses that your business will face, so it makes sense that you want to devote sufficient time and effort to managing this crucial part of your income statement. But payroll is more than just dollars and cents; payroll involves people and emotions. It is much easier to manage payroll and keep it low, then to try to cut payroll back once it balloons out of control. Effective payroll management increases everyone's job security.
Other People Are Reading
Instructions
-
-
1
Hire only the number of employees you need for the normal business demands. During busier or peak business situations, hire temporary workers or pay your existing staff overtime to cope with a seasonally increased workload.
-
2
Develop compensation plans that reward employees for work performed or jobs completed, rather than hours worked. For example, commissioned salespeople work to sell a product or a service and receive commission based on each sale. This allows payroll expenses to fluctuate with sales, keeping the ratio of payroll to income more consistent. Use piecework pay for employees who are in production. If the productivity is low, their salary will be low as well.
-
-
3
Prevent overtime in your non-exempt hourly employees. A group of hourly employees who work for an hour longer each day, resulting in five hours of overtime each week, can increase payroll significantly.
-
4
Calculate the overtime amount and determine if it is a necessary expense to meet business needs or if it's simply inefficiency among employees.
-
5
Shop for benefits packages, including health care and retirement benefits, carefully. Employee benefits are part of payroll, and the costs are significant. Every year, reassess the current benefits package and obtain market quotes to ensure you get the most cost-effective deal. Prices vary widely for different benefits. Consider the cost of any new benefit that you choose to implement, and how it will impact payroll.
-
6
Compensate your employees fairly; do not always look for the cheapest employes, especially for positions that require a certain level of competency. Higher performing employees may come with the highest price, but if their performance drives revenue, they are worth the extra money.
-
1
Tips & Warnings
Terminate underperforming employees quickly, as they can drain your payroll expenses.
Continuously strive to keep payroll costs low so you won't have to institute major cuts all at once, which can cause employee morale and productivity to decrease and affect productivity.
