HR Cost Reduction

Introduction
Given today’s volatile economies and hypercompetitive
markets, businesses are under constant pressure to
compress costs and improve profitability

For HR, this is a challenge as departments are

tasked with cutting costs, without cutting heads and
boosting productivity, employee morale and
engagement

Measuring costs is a key component of HR

accounting.

The first step would be to measure the costs in

terms of expense and asset.
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Modern
of organizations
1 in 4
are under severe pressure reduction of operating
Organizations truly costs are typically
Portfolio
to reduce HR costs* understand the full
HR cost baseline*
achievable
on large scale HR

Presentation
transformations*
 Meet
Why Measure Human Resource Our
Costs
Team

MONITOR MEASURE IMPACT MEASURE IMPACT CALCULATE THE ROI

DEPARTMENTAL AND OVERALL AND OVERALL
COSTS SUCCESS SUCCESS
 HR Cost Reduction

HR cost reduction

Employment costs HR functional costs

Cost of employment Resources HR service delivery Vendor management

► Salary costs ► Redundancies ► Policy and process ► Value of services

efficiency delivered
► Tax efficient ► Review working
compensation practices ► HR structures ► Consolidation of
multiple vendors
► Change pay mix ► Refocus employees ► Roles and
responsibilities
► Cost effective HR ► Address
policies absenteeism and ► Compliance versus
turnover discretionary
activity
 Measures of cost reduction
Ideas
Reduce Overtime Costs
Cost efficient HR policies
Automate repetitive processes
Opportunities
 Addressing working patterns and behavior to reduce overtime
Evaluation of current policies to take advantage of planning
opportunities:
 Termination policy
 Global Mobility policy
 Hiring Policy
 Automating recruitments, screening, assessments, payroll,
learning
 Measures of cost reduction
(Human Resources)
Ideas Opportunities
Employee turnover and absenteeism  Understanding reasons for absenteeism and employee
issue retention
 Develop mitigation activities to address these issues
Maintaining Optimum Staff Level  Review resourcing needs and roles and responsibilities
in each department
 Balancing number of resources eliminating overstaffing
and understaffing
 Understand where there may be redeployment
opportunity

Training and Mentoring  Assess where activities and training may be required
 Increase productivity and reduce employee turnover
 Measures of cost reduction( Vendor
Management)
Ideas Opportunities
Manage vendors effectively  Vendor review including efficiency and effectiveness
 Evaluate lower cost providers

Consolidation of multiple vendors  Understand interest in consolidating providers

 Consolidate providers to provide some substantial cost
saving opportunities.
 Metrices

01 02
Gives context to HR activities Helps in quantifying the efforts made by HR
towards achieving the overall organisational
goals

03 04
Establishes credibility and consistency to It is the steppingstone to build a strong
data analytical framework
 Fundamental
Teamwork, punctuality,
Measures constructs based on
etc
tabulation of data

Higher level constructs Overall job

Metrics based on multiple performance based on
measures above factors

Converting metrics into Analysis of succession

decision supporting management based on
Analytics
insights data
 A case study

01 02
Huge turnover rates: In India, most people Consequent losses: $3 million for
in critical Engineering roles and Project Engineers and $1.8 million for Project
Managers leave within 2 years Managers

03 04
Costs and losses might inflate as demand Ultimately, the company was at the risk of
for these roles in the company will grow in not achieving their revenue goals
the future
 How did The Brew Approach
Identify ‘invisible drivers’ in
employee skills, attitudes
and behaviours that might
cause attrition.

Implementing The Brew’s Interview with top executives

Predictive Analytics Solution. in all the offices present
globally

Gather financial data and other

existing data to add a further
leverage to the insight.
 Some insights

A Increase
salary by 12%,
i.e., INR 84k
Average turnover cost =
10l/employee

Turnover cost saved = 10l x 15

12% increase = 1.5cr
Current
is 15% more
average
effective in Increase in cost = (84k – 35k) x
compensation: 200
retaining than
INR 700k = 98l
a 5% increase

Increase Cost saved per employee =

B salary by 5%,
i.e, INR 35k
(1.5cr – 98l)/200 = INR 26000
Recommendations by The Brew

Increase in compensation is a safe bet to

take, though that can’t be the only measure 01
to be taken up by the company.

Learning and development activities should

02 be strategized for those Engineers whose
careers are inclined towards Project
Management roles

. After finding a bit of stability, the company

should put in place data and analytics driven 03
Talent Management and Employee
Engagement practices for HR health and
stability in the long run
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