6 Ways to Reduce Labor Costs in a Labor-Intensive Business

February 18, 2020
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6 Ways to Reduce Labor Costs in a Labor-Intensive Business

6 Ways to Reduce Labor Costs in a Labor-Intensive Business
February 18, 2020

Credit: SoftBank Robotics America, Source

With unemployment reaching all-time lows, labor-intensive industries are combatting staffing shortages with more competitive pay and benefits. In fact, the Bureau of Labor Statistics reported in Jan. 2020 that wages and salaries rose 2.9 percent for all workers in 2019, while benefit costs increased 2.2 percent. This trend has many companies looking for ways to offset rising labor costs.

Fortunately, there are plenty of ways to balance a strong worker retention strategy with reasonable labor costs. Consider the following six strategies for reducing the cost of labor in your labor-intensive company.


  1. Reduce turnover

Retaining the workers you have today is your best bet for reducing costs. Gallup conservatively estimates that the cost of replacing a single employee can range from one-half to two times the employee’s annual salary. In industries such as cleaning services, where employee turnover might average near 200 percent, lost employees account for huge potential cost savings.

The cost of turnover factors in the time and money a company will spend on advertising and recruiting new hires, training, and a roughly three-month onboarding period during which the worker comes up to expected levels of productivity. Still, that doesn’t begin to calculate the loss of innovators and problem-solvers who know your best practices and approach to service.

The first step to building a retention strategy is getting to the heart of what your employees want. Talk to employees and train managers to ask questions about employees’ pain points. By understanding their frustrations, you can begin to build a retention strategy that balances competitive pay and benefits with a rewarding work environment.


  1. Change your approach

How much time do your employees spend on each task? Do you know for sure? Working more efficiently can reduce time spent on each job and generate more cost savings.

On the job, you might consider using Lean principles to improve efficiency. While the language around Lean can seem confusing, at its heart Lean is solely about eliminating waste. That includes wasted time and effort. Another key for Lean: when done right, it always helps workers more easily do their job. So, consider asking employees for suggestions of how to speed processes along without sacrificing quality of the job. For cleaning companies, this might include adopting easy-to-move supply carts that reduce time spent retrieving equipment, consolidating products for an easier clean, or developing a risk assessment that allows for less frequent cleaning of non-priority areas.

Examine, too, how you are scheduling work. There may be a more cost-effective way to organize schedules, such as a four-day work week, scheduling off-site jobs close in location around the same time, or switching from a zoned to team-based approach to tackling tasks.


  1. Automate the simplest tasks

By automating repetitive tasks, managers allow employees to focus on more value-added work. Not only does this reduce the amount of time spent on a job, but it can reduce monotony for your workers and limit the strain they experience from performing the same tasks repeatedly. After all, it’s that type of strain that can lead to injuries and aggravate your turnover rates.

In the cleaning industry, robotic sweepers can achieve a consistent clean while employees focus on detail cleaning and high dusting … or data analytics and customer interactions. That’s the type of jump in job duties that can keep workers interested in sticking around.


  1. Use the right supplies and equipment

If your costs are growing, it may seem to make sense to purchase cheaper supplies and equipment to offset high worker wages. While this may work in the short-term, in the long-term it can add to your costs by making your workers’ jobs more difficult. It can also add to the level of custom complaints that make your workers’ jobs unbearable. Talking to manufacturer representatives about even the simplest supplies could help you identify opportunities for improving customer interactions and eliminating wasted time.


  1. Train your workers

Don’t make training a one-and-done process. More frequent training can help ensure that staff is performing activities as expected. This can reduce the risks of shortcuts that could jeopardize customer service or lead to costly workers compensation claims. Ultimately, this can also help your staff internalize training methods that they can pass on to new staff or temporary workers.

Training in higher-level tasks—think managerial support or managing new tech-based equipment—also may light a fire under your staff to get excited about coming to work. Data indicates that Millennials in particular value professional development opportunities as an opportunity for self-improvement. They’ll stick longer with those employers that invest in them.


  1. Keep safety first

Labor-intensive jobs inherently have higher risks of injury. Consider the fact that janitorial services have one of the highest rates of workplace injuries. These types of injuries range from musculoskeletal disorders to respiratory issues. Prioritizing safety is important for keeping your workers on the job longer and for reducing compensation claims. Fewer incidents on the job can also lower the cost of your monthly premiums.


Invest in your laborers

Ultimately, keeping your people safe and happy is good for the bottom-line. Companies that invest in their workforce and regularly review operational processes will find opportunities to reduce their overhead. Those business owners and managers are also likely to discover they have allies in this effort already on their staff.


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