- June 8, 2018
- Posted by: Asheesh Sinha
- Category: Business plans
As a new business owner, there are many challenges you face in your goal of turning a profit. One of the critical areas to achieve this is keeping your costs down. Any new business will find the cost of labor to be one of the most significant expenses of operating a business. One area of labor that you can focus on is the cost of hiring employees. This is an area often overlooked by people when developing their business plan. The time spent advertising for positions and then the time spent sorting through applications and resume, followed by the interview process, is costly. The following are a few ideas on how to keep this cost low.
Run background checks
One of the best ways to reduce the cost of hiring is not having to fire your employees. When you run a background check, you will be able to weed out those applicants who are likely to be fired for their job performance, employee theft or other behaviors that are just unacceptable. Along with a background check, it is also a good idea to have a pre-employment drug test done. This goes a long way in preventing incidents at the workplace that relate directly to drugs and alcohol. Naturally, these incidents often lead to termination. Avoiding this before hiring someone reduces costs. Perhaps as part of the background check, have potential employees complete a pre-employment assessment to see if they are a good fit for your company.
Creating a cumulative paid time off program
The cost of absenteeism is high for any business. The drop in productivity is just one example, but chronic absenteeism can lead to termination, and this becomes even more expensive because you now have the cost of hiring a new employee. With a cumulative PTO program, your workers’ bank paid leave that is directly related to the number of hours they work. This provides an incentive for your workers to only take time off from work when they need to.
Create a safe workplace
Another idea is to take proper safety precautions to prevent employee injury. Not only will this help cut down on workers’ compensation claims, but you won’t have to hire temporary workers to replace injured employees. Temporary workers are less productive than your regular workers because there is a learning curve to doing the specific work at your company. Also, a safe workplace will reduce absenteeism due to smaller injuries that may only require a day or two off but will still hurt your company’s productivity. This safe workspace will also include any unnecessary things such as clutter that can be dangerous and cause problems if an accident occurs.
A profit sharing program
This can be effective for new companies that have sizeable upward potential. It can be challenging to find good talent but even more difficult to retain it. A profit sharing plan that requires a few years to become fully vested will motivate your employees to stay at the company and receive the entire amount. This type of profit sharing plan is most effective when the project cannot be cashed until the employee quits or retires.
These are only a few ways to cut down on hiring costs. In general, you should focus on hiring the right people, to begin with, and then work towards retaining these quality workers.