Cost cutting | 3 ways to drive savings in HR

3 ways to drive savings in HR
SD Worx

For many businesses, the pandemic has created extra pressure to find cost savings with revenue streams either drying up or uncertain. Cost optimisation is an ongoing critical concern. However, for HR, as with any function, the balance must be about balancing business value with any cost cutting programme.

There are also different schools of thought when it comes to cost cutting. For some HR functions, it will be about knowing what they can let go when they are asked. For others, it’s about building cost optimisation into ongoing strategising. “Successful HR leaders focus on cost optimisation as an ongoing discipline, not as a one-off exercise,” said Matthias Graf, Senior Executive Advisor at Gartner. “Cost optimisation strategies should look beyond cost-cutting and proactively promote options for immediate efficiency gains, while not compromising on long-term impact on business performance.”

To help with strategic cost optimisation, HR Grapevine scoured the internet for some of the most popular strategies – looking at why they might work. Read on below.

1. Automation

Last year, HR Grapevine spoke to Ryan Cheyne, People Director at about the challenge of automation. “Automation, AI and continuous change”, he said, “create a volatile operating environment for the function. However, there is also opportunity.”

As explained in an HR Grapevine article Have the HR and People functions split forever? automation could free up HR from a variety of administrative tasks. What this does is free resource up for more creative, value-add tasks that, in their own way, have the potential to create more revenue streams for the business. Primarily, automation of administrative or data-driven tasks do save costs too.

As Graf explained, if this self-assessment and implementation is more regular, it could promote efficiency and cost saving in a regular and ingrained manner.

2. Flexibility

It goes without saying that flexibility is now considered, by most leaders worth their salt, a boon. For many, it could make organisational savings. If flexible working is promoted, for instance, it could allow a firm to rent less office space if they never expect it to be at full capacity. Gartner assessment suggests that the concept of flexibility could also spark savings for HR.

For example, if HR is structurally flexible it could have hybrid roles (cost saving!) that mean an HR business partner is seconded to other departments when they are most needed. Another example is that HR resources could be pooled. In theory, this means a lower cost base for the function whilst also being responsive to changing business needs.

3. Payroll

Most businesses pay little attention to their payroll functionality, believing it to be a fixed cost or almost invisible. However, optimisation could provide major savings. Smaller organisations are now saving an average of £45,000-a-year by assessing their payroll capability, whilst larger organisations are looking at up to £700,000.

However, before savings can be made, HR has to look at its own payroll capability. As ever, the first step is to understanding what payroll does, what processes it involves and what technology it utilises.

If you want to get a better understanding of your payroll function, why not take advantage of an efficiency review with our partner SD Worx? To get started, simply complete the form below.

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