Human resource is key to companies performance and results . Considerable money is invested
in grooming employee for next level .
Cost reduction strategy in human resources -a mighty task in the field of business specially when
having to deal with the sour economy. No particular segment seems to be free from the grab of
cost cutting strategy, not even human resource management.
When we talk about reducing cost, the initial outlook would seem rather positive because one
hand, an organization is reducing its debit segment and increasing its way to hold a greater
saving while a broader perspective gives a totally different outlook.
The first question that any company comes up with, when having to deal with the term "cost
reduction strategy" is what will be the outcome. What if, the strategy doesn’t really match up with
the vision set by the companies or what if it will have a spill over effect?
Even though, this approach might seem possible in the areas of Marketing, manufacturing or
financing, but what strategy is really fit for the human resource. Simply cutting down cost by
evicting employees is truly not a viable option.
Initially, the company has to analyse and gain a broader perspective of the situation. Usually,
there are three main stages mainly stated as short run reduction strategy, moderate and long run.
Each stage holds a different ways to reduce cost in the personnel department.
First of all, let’s assume that a company is bearing the downturn for shorter span of time, say
temporary decline in business activities. In this situation, the company can come up with strategy
such as mandatory vocation, overtime pay reduction, cut in salary, reducing labour costs and
decreasing the work days.
While on the other hand, if a company has move up to the second stage in the reduction strategy,
i.e. when the firm has been facing the downturn for half year or more, in the form of reduction in
sales then the strategy that the company should come up with ideas such as extended salary
reduction, furloughs, lending of employee or even exit incentives.
The strategy of retaining high performing employees and various lay off related plans can be
depicted in the case of long range cost reduction. This situation is really volatile as the company
faces this situation under the circumstances of worsening economy or degrading performance for
a year or more.
Having said that, it is however very important for the firm under situation as this, to critically
examine all the perspective in the long run. As any decision taken by the company has its
outcome reaped in the coming economy-an economy which seems yet so uncertain.
Cost reduction strategy-a mighty task in the field of business specially when having to deal with
the sour economy. No particular segment seems to be free from the grab of cost cutting strategy,
not even human resource management.
Human resource deptt in general handles ,following
Wages /Employee benefit such as Bonus , Medical benefit , Insurance , Provident Funds , Gratuity
Time keeping / Payroll processing ie overtime and productivity based incentives
In recent times the best option to reduce cost has been reduction manpower or employees .
Other methods applied by companies in these tough time has been . Well it may not be the
solution but in these circumstance companies are trying all ideas to cut down cost through
various means .
- Reduce number of working hours
- Reduce weekend job s
- Overtime to be eliminated all togerther
- Re-evaluate Group Health Insurance
- Review Job Planning Procedures
- Encourage Vacations During Slow Periods
- Offer Voluntary Unpaid Time-Off
- Consider Offering Early Retirement Packages
- Restricting usage of privileges such as telecom -long distance calls and flights
Read more on human resource cost management .
HUMAN RESOURCE -COST TO COMPANY