Reducing Employee Costs Without Reducing the Number of Employees

Jude Williams, SPHR

To Cut or Not To Cut

Massive Layoffs in Recent Years Workforce Management Poll Oceans of Opportunities Await

What Do You Think?

Role Play Tools to Reduce Employee Costs Overall Goal = Profitable Employer +

Productive Employee

Company’s Current Situation

Sales down by 38% year over year Sales down by 15% over last month Utility costs going up Employee health insurance up for

renewal – last year’s increase 23% Suppliers want their money

What Do You Think?

Would you cut or not cut? Why? What things would you consider in your

decision?

What Employee Costs Do You Consider and/or Track? Salaries Benefits Workers Compensation Unemployment Social Security Vacation, Holiday, other PTO

What Employee Costs Do You Consider (continued)? Training Costs Perks Facilities Turnover or cost of replacing

Employment Cost Index

Do You Know Your Current Employment Cost Index?

Costs Due To Someone Leaving

Calculate the impact on department productivity. Who will pick up the work, whose work will suffer, what deadlines may be missed, what services/products will be eliminated?

Calculate the cost of severance, benefits continuation, paying out accumulated PTO and other conditions of employment costs.

Calculate the cost of unemployment benefits plus the cost of preparing and participating in unemployment hearings and proceedings.

Costs Due To Someone Leaving

Calculate the cost of the person filling in while the position is vacant.

Calculate the loss of productivity at 50% of the person’s salary and benefits for each week the position is vacant.

Calculate the cost of an exit interview, administrative costs of stopping payroll, COBRA administration, and other functions and/or costs involved in terminating an employee, I.e. collecting company equipment, etc.

Costs of Turnover

Do you know your company’s true cost of turnover – either voluntary or involuntary? Is there a difference?

How do you track your turnover metrics?

Unemployment

Have you aggressively fought unemployment claims in the past?

Do you have a written policy, trained your supervisors, and reviewed every termination?

Do You know that every 1% jump in SUTA costs you $125.20 per employee per year?

Unemployment – Shared Work Program Reduced hours means “shared”

unemployment benefits Have to apply for it prior to reducing

hours Win-win for everyone

Workers Compensation

Do You Know Your Current Modifier? Cost Effective Provider Are You Confident that Jobs are Coded

Correctly? Safety Programs In Place? Light Duty Jobs First Responder or Triage Nurse on Site

Other Opportunities To Save

Work Opportunity Tax Credit (WOTC) Health Insurance Premium Tax Credit

Work Opportunity Tax Credit (WOTC) Credit for hiring employees from any of

12 targeted “hard to employ” employee groups

WOTC Targeted Groups:

Qualified Food Stamp Recipient Qualified Veteran Disabled Veteran SSI Recipient Designated Community Resident Qualified Ex-felon Qualified IV-A Recipient Unemployed Veteran

WOTC Targeted Groups:

Vocational Rehabilitation Referral Qualified Summer Youth Disconnected Youth Term Family Assistance Recipient

WOTC Requirements:

New adult employees must work over 120 or 400 hours

The credit is 25% of qualified first year wages for those employed at least 120 hours and 40% for those employed over 400 hours or more

WOTC Tax Credit for Employers:

$2,400 for each adult new hire 1,200 for each summer youth hire $4,800 for each new disabled veteran

hired $9,000 for each new long term family

assistance recipient hired over a two year period

Health Insurance Premium Credit

Helps small employers provide affordable health coverage to their employees and dependents

Also applies to individual plans

Health Insurance Premium Credit

$1,000 for single employee $3,000 for family OR – 50% of the health insurance

premium which ever is less More information – www.azdor.gov,

click on tax credits and select health insurance

New Hire Costs

Cost of Hire Cost of On-boarding Cost of “outfitting” – desk, supplies,

equipment, change from old employee to new

Training Costs

Orientation costs = salary cost + cost of person conducting orientation + orientation materials.

Calculate the cost of departmental training (include person conducting training – their salary plus loss of productivity if this isn’t their main job.

Calculate the cost of all training materials, include resources such as internet connection, etc.

Lost Productivity Costs

New employee contributes at a 25% productivity level for first four weeks.

During weeks 5 – 12, contributes at a 50% productivity level.

During weeks 13 – 20, contributes at a 75% productivity level.

After that – we hope they get to 100% soon! But how can we be sure???

What’s the REAL Cost – Of Either Decision? Do the math! Think outside the box.

Final Thought – Blessed are they who are flexible – for they

will never be bent out of shape.

Questions???