6 tips to reduce labor costs to you

6 tips to reduce labor costs to you

Too many small business owners consider employees as a burden and a massive expense. Although labor and employee salaries are a significant portion to any small business budget, they are still necessary to the success of the company. Thankfully, there are ways to reduce labor costs and keep your company growing and successful.
Avoid Overtime
Anyone who operates a business, alone or with others, may incorporate. This is also true for anyone or any group engaged in religious, civil, non-profit or charitable endeavors. You do not have to be a business giant to be able to have the financial and other benefits of operating a corporation. Given the right circumstances, the owner(s) of a business of any size can benefit from incorporating.


Overtime can be a heavy labor burden. Paying 1-1/2 to 2 times the regular hourly rate can add up quickly, especially in times of heavy production. Cutting labor costs by reducing overtime for non-exempt employees is a good strategy. Read below to find ways to prevent overtime.

Hire Temp Help

It is common in many small businesses to have peak periods of business production. A retail specialty store may have extended hours and need more employees during the year-end holidays. A clothing designer business may need extra help to produce summer styles. Whatever your need, you can look to temporary agencies to help cut labor costs.
This is the most common corporate structure. The corporation is a separate legal entity that is owned by stockholders. A general corporation may have an unlimited number of stockholders that, due to the separate legal nature of the corporation, are protected from the creditors of the business. A stockholder's personal liability is usually limited to the amount of investment in the corporation and no more.


Why hire a full-time or even part-time employee when you only need extra help at certain times of the year? Temp help is a great way to reduce labor costs and keep your production or sales going strong.

Streamline Processes

One problem that many small businesses face is inefficiency. This stems from the lack of established and written procedures that your employees can use to make their jobs easier and faster.

Don’t reinvent the proverbial wheel every time you need a project done. Reduce labor costs by using tools like a conveyor belt for assembly, hierarchy of approval for purchase orders, written recipes for your chocolate confections, etc.

Use Technology

Technology can help you in cutting labor costs as well. Computers can automate many tasks that might need an unnecessary manual hand. Equipment can greatly reduce production time and costs, especially for certain heavy labor jobs. Even simply computer software can enhance and improve project management and workflows so that more gets done with less labor.

Hire the Right Worker for the Right Job

Know what each job entails and what necessary skills are required to perform them. Then hire employees that best match those skill sets. Your bookkeeper should have college-level accounting training. A plumber should have passed an apprenticeship. Hiring the best candidate for each job will both reduce labor costs and increase your production and efficiency.

Train Your Employees

You can help your staff and employees become more efficient and more proficient in their jobs by training and educating them. Offer an education bonus for those who wish to take a college course, attend a seminar, or even attend a conference. The benefits you’ll see are greater production and ultimately a reduction in labor costs.
With the Tax Reform Act of 1986, the S Corporation became a highly desirable entity for corporate tax purposes. An S Corporation is not really a different type of corporation. It is a special tax designation applied for and granted by the IRS to corporations that have already been formed. Many entrepreneurs and small business owners are partial to the S Corporation because it combines many of the advantages of a sole proprietorship, partnership and the corporate forms of business structure.

S Corporations have the same basic advantages and disadvantages of general or close corporation with the added benefit of the S Corporation special tax provisions. When a standard corporation (general, close or professional) makes a profit, it pays a federal corporate income tax on the profit. If the company declares a dividend, the shareholders must report the dividend as personal income and pay more taxes.


Your employees don’t have to be a burden. Give them the tools they need, and create efficient processes to help reduce labor costs and improve your bottom line.