HR- The Hidden Costs of Business | Get Financial Freedom Tips | Transform Your Financial Future


Thursday, January 31, 2013

HR- The Hidden Costs of Business

The fragile economic environment of the past few years has left many businesses looking for ways to cut expenditure. Often such activities have resulted in redundancies, cuts to funding and reductions in the earning potential of employees. Although such decisions can reduce costs in the short term, they can have a damaging effect on a business’s performance in the long term. For example, reductions in staffing levels can in-turn reduce a company’s work capacity often leaving other employees with an unmanageable workload and clients unhappy due to missed deadlines. 

The Hidden Costs of Business

The negative effect of the “cost cutting” measures seen above can almost certainly have a damaging long term secondary repercussions on employees and a business’s performance. Therefore, with this in mind it is important for businesses and business owners to do all they can to reduce costs before such extreme actions are taken.  

One way to do this is to evaluate areas of inefficiency within the business and look to find the reasons for why such are inefficient. One department that is often overlooked and could potentially solve financial problems is the management of human resources. 

What is Human Resource Management? 

Human Resources or HR is a professional department of a business that oversees and manages employees. If done successfully it can reduce staff turnover, improve productivity and enhance overall morale of the workforce. 

An internal HR department will deal with managing staff sickness and performance, application of employment law best practices and the recruitment of new talent for the company.  

How can it save me Money? 

Despite the benefits seen above an inefficient HR department can display just as many negatives. If a business has poor interpersonal skills with employees, an ineffective recruitment process and also fails to abide by the latest employment laws it could find itself wasting precious time and money.
1) Recruitment Process – HR is essential to an efficient recruitment process as it can ensure a business only hires the best possible talent specific to a business’s requirements. Proactive changes to the recruitment process can in-turn reduce the chances of high staff turnover as new employees are likely to be a better fit for the company’s culture and work ethics. 

It is worth remembering that recruitment costs can be highly expensive and depend upon the caliber of candidate a business is trying to attract, therefore any changes to help reduce frequency of recruitment will be beneficial. 

2) Underperforming Staff – Dealing with under performing staff can be a time consuming and difficult process for any business owner. With so many employment laws and legislations doted around it can seem as if managers and owners are now treading on egg shells when dealing with employee related issues. To save time and potentially money businesses should consider external support and guidance from HR specialists will allow businesses to concentrate on other important day to day activities.

3) Employment Law abidance – For any employer it can be a difficult process knowing how to deal with holiday pay entitlements, dismissals, employee absences and notice pay periods therefore it is essential to receive professional guidance to ensure commitments under employment legislation are fulfilled. Failure to abide by such laws can cause all sorts of problems for employers and leave them in hot water. 

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