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HR Cost-Cutting Measures

HR Cost-Cutting Measures - A Guide for HR ManagersAre you a human resource manager or HR professional that has been asked to help your company cut costs? Besides reducing paper use, limiting morning donut runs or making the company party a potluck, how else can you save bucks at the end of the month? What about the role of compensation in human resources cost cutting?

HR Cost-Cutting Measures – A Guide for HR Managers

Are you a human resource manager or HR professional that has been asked to help your company cut costs? Besides reducing paper use, limiting morning donut runs or making the company party a potluck, how else can you save bucks at the end of the month? What about the role of compensation in human resources cost cutting?

Let PayScale’s experts give you advice on trimming the fat with HR cost cutting measures. Below you will find six key questions for a human resource manager to ask when company cost-cutting that will help you better reduce spending for your organization.

6 Questions to Ask When Company Cost-Cutting

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1. Has your organization recently reorganized job responsibilities and job roles?

When a change has been made to what a job position requires, you may be able to pay less for the work being done than you were before. It’s important for a human resource manager to benchmark compensation for the newly created job positions before slotting in talent that is often more expensive than the role demands.

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There are many ways to research this data. Just be sure that one of your salary resources provides up-to-date, real-time compensation data. With the recession, salary market rates have changed. In order to save money, human resource managers need to be quick to respond to these changes. PayScale’s database offers you a quick and easy way to get the timely, specific compensation data you need to benchmark any position quickly. If you’d like to get a free PayScale MarketRate report for a job position you are benchmarking, send me email.

2. Is your organization planning to hire this year – either backfilling for departures or creating new positions?

If you’re a human resources manager who’s planning to hire, do some salary research first. You might be able to lower the salary range for the position this next time around. Re-evaluate the current salary market rates for all new hires (replacement and new positions) to avoid losing money to the “over-payment tax” in current and future years.

3. Are there employees who currently earn more than the highest end of your salary ranges, or more than the 75th percentile of the market?

Since cutting an employee’s current salary is rarely a good choice for morale or retention, you may prefer a more practical hr cost-cutting measure that works for you long-term. Many human resource managers choose to implement a “red circle” policy to freeze salaries for employees earning more than the upper limit of internal salary ranges or above-market compensation, eliminating costs associated with performance increases and salary reviews.

How do you know if an employee is earning higher than the upper limit of their salary range? One way to catch this budget-buster easily is using PayScale’s Insight to keep track of your company’s overall compensation rates and compare them to the external salary market data for your industry anytime. You simply upload your employee compensation data and salary ranges and then you will see your internal data lined up next to market rate data in a simple spreadsheet format. You can see a sample report, or if you’d like a private demo, just drop me a line.

4. Are there categories of jobs for which the organization’s compensation ranges are misaligned with current market rates?

Letting employees know the limits of your compensation plan can create big gains. Create rigorous salary limits for certain positions and grades, particularly for positions not deemed mission critical.

5. Does your organization reward top performers more than average or reward low performers?

One way to stay lean is to avoid handing out employee bonuses to everyone or giving away too large of bonuses. Institute or reinforce a pay-for-performance approach to salary reviews, increasing salaries only for individuals with stellar performance and reducing annual performance increase costs overall.

As a human resource manager, it’s important to ensure that you’re rewarding your top performers fairly and at a compensation rate that’s competitive in your industry. Finding compensation data about bonuses, though, can be tough. You might find total compensation data but finding specific bonus information by job title is often harder. PayScale’s Marketrate let’s you compare different employees’ bonuses easily and see how their total compensation compares both internally and externally with employees in similar job positions.

6. Is your organization’s salary benchmarking data at least six months old?

Do you feel like a lot has changed in your industry in the last six months? You’re probably right. As a human resource manager, you feel the brunt of these market changes. How much have your salary ranges changed to reflect the shifts?

It’s wise to refresh your compensation data with current market rates for your job positions at least every 6 months to ensure that the organization salary ranges are not inconsistent with current market rates. Make sure you know the date your compensation data was collected. If you used it six months ago, that doesn’t make it six months old since it had to be collected earlier in order to be delivered to you on-time. It’s almost certainly older than six months if it came from a traditional salary survey.

Using multiple compensation data sources is something that human resource managers at large companies do because they can afford to use a customized tradition survey and then fill in any gaps on job position data with online, employee-reported data. If you are a small company, using only employee-reported data alone for updates is a cost-effective way to keep your compensation data fresh.


Gwendolen Sheridan

Senior Director of Account Management and Customer Service at PayScale

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