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As Brexit looms, HR needs to trim labour costs

4th Apr 2019
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As the UK continues hurtling towards an uncertain economic future due to the looming split from the European Union, the only thing that is certain is that the national economy is going to take a serious hit. With economic contraction already underway, the only real question is how bad the damage will eventually be and how long it will last. For businesses, that means time is running out to prepare for the fallout by streamlining their operations and seeking every last bit of efficiency possible.

Since labour is one of the primary operational costs for most businesses, it falls to HR professionals to do most of the work in the cost-cutting efforts. The problem is that Brexit is also fuelling labour shortages that render many traditional cost-saving measures, like offering buyouts for long-tenured workers, ineffective and impossible to carry out. Still, HR has to rise to the challenge and find ways to prepare their businesses to face the worst of the possible fallout that's on the way. Here's how they can do it.

Get a firm grasp on current costs

The first step in figuring out where to focus cost-cutting or efficiency efforts is to gather the relevant data required to build a picture of the business's current labour costs. Depending on the industry, this can be either a straightforward accounting exercise or a complex extrapolation of available data. That's because the factors that go into calculating employee cost may vary wildly between businesses, and there's no universal equation that HR professionals can rely on to produce business-specific accurate figures. Once a baseline measure exists, however, it becomes possible to compare the results of whatever cost-control plans go into effect by comparing their performance against the month-to-month charting of labour costs increases in the overall economy.

Examine benefits packages

In circumstances where lowering direct labour costs (by hiring cheaper labour) is difficult or impossible, the first place to begin looking for savings is within employee benefits packages. That can mean anything from a re-examination of any employer-provided private medical insurance (PMI) to a thorough review of things like commuter reimbursement programs and perks like gym memberships and the like. Before making any decisions, the first priority should be to look for benefits that aren't widely used by employees, which may be eliminated without much resistance. Wherever possible, the process should be carried out with as much transparency as possible, especially with regard to any employees that could be affected by whatever changes are to be made.

Look to enhance productivity

Sometimes, the best way to lower labour costs is to take steps to increase the per-employee productivity rate to a point where workforce reductions may be safely made. While this must be done with care to avoid burning out the very workers the business depends on, there is always room for improvements in this area, especially for businesses in the UK. To begin with, it's a good idea to address employee wellness issues, and create (or fine-tune) an employee wellness program that aims to cut down on absences due to illness and other preventable causes. Then, consider increasing workflow automation wherever possible, as many UK businesses are currently in the process of doing. Even a small productivity boost can have an outsize effect on the business' bottom line, so in this area, any optimizations are worth pursuing.

Explore outsourcing options

Under certain conditions, it can be advantageous for UK firms to turn to outsourcing to solve their labour issues. Right now, with migratory movements of skilled labour into the UK almost at a total halt, it could be a good idea for HR professionals to push their companies to explore moving certain operations out of the UK to regions where needed skills are in greater supply. Of course, there are some uncertainties involved in this process as well, with cross-border legal frameworks yet to be worked out post-Brexit, but getting an early exploratory start is more than advisable.

Run a tight ship

Right now, no HR professional can know how much preparation is in order to keep their company thriving in a yet-to-be-settled post-Brexit environment. It's best to be as aggressive in cutting costs and improving efficiency as is possible without harming current output levels or putting an unreasonable strain on current employees. That's a challenging balancing act, to be sure, but it's one that all UK HR professionals now face to one degree or another – and now all that's left to do is go out and execute whatever plan results from a strategic review of the above labour cost factors and hope that it's enough to blunt whatever fallout remains.

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