4 Administrative Cost Reduction Ideas for your Business

Posted by Derek Carlstrom on September 30, 2020 at 9:45 AM

4 Administrative Cost Reduction Ideas for your Business

Running a business is expensive. Most companies try to cut costs here-and-there. Whether that's reducing your tech stack or eliminating paper, cost-cutting usually requires eliminating something in the hopes that your end ROI is higher than before.

Learn more about HR strategy for business performance

For most businesses, the cost-cutting process starts with administration. Small and medium-sized businesses (SMBs) spend a whopping 240 days a year (on average) on administrative duties. So, finding ways to reduce your administrative cost burden is certainly front-of-mind.

But you have to be careful. Plans to reduce administrative costs have to consider workforce impact. For example, eliminating technology may save you money, but it may also reduce productivity.

Luckily, there are ways to cut administrative costs without impacting your workforce or even "cutting" any value out of your organization. One of these ways is by finding an outsourced HR partner. Not only will have an outsourced HR partner help you reduce tangible costs (e.g., technology, benefits, etc.), but they can also help you cut the hidden intangible costs that trickle throughout your business.

Here are 4 ways that teaming up with an outsourced HR partner can significantly reduce your administrative costs.

1. Lower the Cost of Benefits

Benefits provide tangible benefits to your company. 72% of workers admit that an increase in benefits would boost their job satisfaction. Employees list benefits among the top two drivers for selecting companies during the job hunt. And a full 50% of workers have left their job to pursue another career with better benefits. 

In other words, benefits help you attract top talent, retain existing talent, drive culture, and create productive and engaging atmospheres. But benefits aren't cheap.

For many SMBs, the costs of benefits may outweigh the pros. Your enterprise-grade competitors have access to better benefits at cheaper rates than you do and trying to compete with them can cost an arm-and-a-leg. Fortunately, you have options. Outsourced HR partners like Professional Employer Organizations (PEOs) offer SMBs access to enterprise-grade benefits at enterprise-grade prices.

2. Consolidate HR Technology

HR tech is expensive. SMBs spend as much as $319 per employee on HR technology. When you consider the sheer size of HR administration, the tech stack considerations are substantial. 

From payroll to employee management and reporting, HR administration has many needs. Dealing with this smorgasbord of systems and technology is costly. You have to spend time and money on vendors and training, integrating the systems, and running those systems efficiently.

This is another area where HR outsourcing can eat a chunk of your costs. Your outsourced HR partner will bring their own vetted tech stack. That means instant access to a consolidated HR tech stack.

3. Lower Workers Comp Costs

Workers' comp gets expensive — fast. Rates vary by classification code, previous losses, and your Experience Modifier. On top of this, you'll pay an upfront fee and administrative fee to acquire workers' comp. The sooner you can cut these costs, the better.

HR outsourcing partners give you access to their workers' comp insurance. Typically, this is an A-rated insurance carrier, and the upfront deposit is already paid for you. In other words, you turn workers' comp from a long-term, expensive ordeal into a pay-as-you-go service with a comped deposit. Even better, this plan could lower your Experience Modifier rate, which reduces your overall costs and improves your ability to secure government contracts.

4. Reduce Administrative Burdens

Benefits, technology, and workers' comp are easily measurable, tangible costs. But what about the intangible costs? Specifically, how much are administrative burdens costing your company? 

Let's say you employ three HR pros. Their average salary sits around $67,000. When they have to spend most of their day dealing with admin, you're losing money. In fact, even HR managers — who typically focus more on employee relationship — spend a whopping 4 - 5 hours a week on administration on average.

When you partner with an outsourced HR partner, your HR employees can spend more time building vibrant cultures, working on employee relationships, and focusing on employee happiness and productivity. This builds value instead of sinking it. 

You can't ignore admin. You still have to stay compliant. Outsourcing helps you free up HR time by unshackling your HR employees from repetitive and mundane administrative duties. 

HR Outsourcing Provides Meaningful Administrative Cost Reductions

Trying to lower utility bills or micromanaging office equipment needs may save you a few dollars. But, in the grand scheme of things, it's not going to make-or-break your company. You need to focus on the bigger picture. HR outsourcing provides meaningful administrative cost savings without impacting your bottom-line productivity. And in today's competitive ecosystem, those cost-savings may be essential to growing your bottom line.

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Derek Carlstrom


Topics: Outsourcing HR / PEO

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