How Technology Is Cutting HR Costs | Extraordinary Business
Human resources can be the biggest operating expense for many businesses. A typical profitable company spends about 15 to 30 percent of its gross revenue on payroll, a number that can rise to 50 percent in service industries, according to Second Wind Consultants. This includes money spent on salaries as well as insurance benefits, retirement benefits and taxes. When these expenses are factored in, the average employee costs 18 to 26 percent more than their base salary, so that a worker who earns $70,000 a year might actually end up costing his or her employer $88,000, explains CNN Money. Fortunately, technological advances are providing ways for businesses to increase their efficiency in ways that save time and reduce the costs of human resources. Here are three ways technology is helping companies cut their HR expenses.
Streamlining Staffing Needs
One way technology is cutting HR expenses is reducing the need for dependence on humans. The most dramatic example of this comes from robotics. By 2025, robotics will boost productivity 10 to 30 percent in many industries while lowering labor costs by an average of 18 percent around the globe and 22 percent in the United States, a Boston Consulting Group study projects. The computer, electrical, transportation and machinery industries will deploy the majority of advanced robotics during this time frame, transforming the manufacturing industry. Companies of all sizes will benefit from robotics’ advances due to falling costs, which will make robots available for as little as $25,000.
However, businesses don’t need to buy a robot to leverage technology to streamline their staff. Digital automation is also enabling companies to increasingly automate many business processes. For instance, custom o-ring manufacturer Apple Rubber uses its website to provide a material selection guide that assists customers in browsing the company’s extensive selection, reducing the burden on Apple Rubber’s sales team. Similarly, Amazon Web Services uses an online knowledge center to reduce its customer service load, illustrating a practice being adopted by many businesses. Business planning, accounting, inventory and logistics are a few other examples of processes that companies are increasingly automating.
Reducing the Cost of Hiring
Hiring is another area where technology is helping companies cut HR costs. Finding a replacement for an employee costs the equivalent of six to nine months of his or her salary, the Society for Human Resources Management estimates. Total costs of searching for new employees include expenses for advertising, interviewing, screening, hiring, on-boarding and training. One way employers are using technology to reduce these costs is turning to video interviews. By using video interviews to streamline interview scheduling and cut travel costs, employers can save as much as 32 percent per hire, including 67 percent saved on travel expenses, according to Aberdeen Group. Companies are also using onboarding software to cut the cost of bringing new employees aboard. Employees who undergo a structured onboarding process are 58 percent more likely to remain with a company over three years, according to the Wynhurst Group.
Expanding Hiring Options
Technology is also helping employees cut HR costs by making it easier to hire remote workers and outsourcing contractors. Remote workers reduce costs associated with on-premise rental space. For example, American Express reports real estate cost savings of $10 to $15 million annually from hiring remote workers, while Aetna saves $78 million a year. Remote workers are also more productive, have a higher retention rate, cost businesses less on travel, take fewer sick days and save employers on overhead. A typical business would save $11,000 per year by employing remote workers, according to Global Workplace Analytics research.
Rick Meekins is the Managing Consultant at Aepiphanni, the trusted advisor for business leaders who are seeking forward-thinking solutions to help them plan for and navigate through the challenges of business growth. Our entrepreneurial multidisciplinary team works with clients to develop differentiating solutions and provide direction focused on lasting, strategic results. We exist to help our clients CREATE | DESIGN | BUILD extraordinary businesses.
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