8 Tips to Reduce Your Payroll Costs
Updated: Nov 29
Time and again, when posed with the idea of reducing payroll costs, one is clouded by societal misconceptions that limit tax digital software usage because of lack of trust and the conventional method of manual calculations. This is rather tedious work that can even lead to penalties.
Considering that there are monetary penalties when payroll taxes are paid wrong, one should invest in making tax digital and reducing errors. This helps in bringing down payroll costs, among other methods like quantification of time, regulation in compensation, and reducing redundancy.
You should ensure no overstaffing is done, and the billable hours are in proportion to the work done. Break hours should be calculated while measuring the worth of employees vis-a-vis their productivity.
Among the many other employee costs that are due, business payroll costs are one of the most difficult ones to a payroll manager. These are costs incurred by an employer to compensate all its employees, including compensation and the employer’s share of payroll taxes.
Reducing payroll costs will help you invest better in the business. To reduce payroll taxes, you need to know how to work your way through the following factors:
their working hours
redundancy in work
You need to have an overall better knowledge to work on these.
If you are looking for professional help to decrease payroll costs, book a free consultation with us. Read on to know some tips we have curated for you to excel in this, which is by leveraging the HMRC payroll software.
REDUCING EMPLOYEE TURNOVER
Hiring and training employees take up a lot of staff as well. The resources that go into doing so are also counted as billable hours for the employer. Considering payroll systems, you should reduce the frequency of hiring. Also, you can limit or overlap training to repetitive cycles to decrease outflow.
To put it in perspective, making tax digital has allowed technical changes to be fostered, and the work progresses faster. Training can now also take place via videos and remote sessions, which assists in reducing manual labour and labour costs.
ABSORB WORKING HOURS
Most employees get paid according to the number of allotted working hours and not the number of hours they work. This leads to increased costs for the employer. Since it affects the turnover directly, you should pay using tax digital software for the actual time worked and not the scheduled time.
Wherever possible, hire part-time workers who will be on the payroll for a lesser number of hours. This will give space to you to cut the extra hours of the employees where work is not being done. You can also pay people according to individual skills, experience, and turnover.
COMMISSIONS INSTEAD OF FIXED SALARIES
When you give fees or commissions instead of a fixed amount per month, the employees will give out better output. Their work turnover will increase, and so will the motivation to work. At the same time, it will positively influence your company and its growth.
That said, it is crucial to consider the job roles while considering making this switch. Some job roles are much more encouraging with fixed salaries, while a few would improve performance under commission. Be mindful of the advice of your payroll manager while figuring out the best way.
PAYROLL ERRORS AND ROUNDING
A lot of places still use a manual system of record when it comes to attendance and hours. This allows space for bias in favour of the employees that can cost you extra. Anywhere between 15-30 minutes per day per employee also adds up to a huge amount at the end of the month.
Inaccuracy leads to severe monetary penalties. HMRC payroll software can help you work on the errors in the payroll. This prevents investment in reconciling, reprinting, and reprocessing the mistakes.
Thus, when automation is an option, you should not compromise by keeping a manual record.
REMOVE REDUNDANCY FROM THE WORK
There are a lot of overlapping job roles that keep repeating the same work at different levels. This results in redundancy, which impacts more than the ease of cross-checking. Redundant work means you’re paying two people for the same job. Try to cut it down to the least number of levels possible.
Overstaffing is not as such a problem for medium-sized businesses. However, if you have people employed for the same task, there is a good chance you’re over-spending on compensation. Consider changing job roles to absorb your human resource capital and regulate payroll systems to suit you the best.
Even though it is the responsibility of the payroll manager to coordinate this field of work, it is crucial to get a legal point of view as well. You are bound by certain legalities to pay tax as per your revenue and expenditure. It only makes sense to get lawyers involved when you want to balance better.
Once you get professional legal help, you realise what is actually mandatory for you to do and why. This removes all the areas that don’t have reliable answers to these questions. Consulting lawyers help manage payroll systems in a much more efficient way while also being responsible.
REVIEW COMPENSATION LEVELS REGULARLY
There is a constant outflow of money in the form of compensation. Often, people get this fixed due to their past experience and the knowledge they have accrued over time. These scales are rarely changed, which might be a liability, mainly for small and medium-sized organisations.
A lot of employees keep working at the same pay scale and start to under-deliver after a point of time. For others, an increase in compensation would actually prove to be a positive motivator to deliver more. Thus, regulating compensation based on work and effort is ardent to maintain employee efficiency.
If you are resourceful enough, you can readily save a lot of costs by outsourcing a part of the work you do. You must get the work done right for clients. If your labour costs add up to account for an amount unfavourable to you, consider getting the job done from a trusted source to reduce costs.
Organisations work well on getting the raw material, but most people ignore outsourcing. Delegation of work does not always mean giving away work; sometimes, it means taking the responsibility of getting the job done. You will still be accountable and paid for your work.
In today’s age of technological revolution, are you investing enough to convert time into money?
Automation is the key to turn manual employee labour and effective costs into productivity. Think about how the benefits of reducing payroll costs can increase profits for you.
Interested in how the right software can reduce your labour costs?