What is Human Resource cost? The secret to optimizing Human Resource costs effectively

Human Resource cost? How to optimize human resource costs efficiency? Let's read Viindoo's article below to learn more.

What is human resource cost?

Human resource cost (HR cost) is the total amount that an organization or business must pay to hire and maintain employees to work in that organization...

Specifically, Human Resource costs include:

  • Recruitment cost;
  • Training and development costs;
  • Compensation and benefits: wages, salaries, bonuses, insurance, retirement plans...;
  • Expenses for providing working facilities for employees: uniforms, computers, stationery...;
  • Employee engagement and retention: employee recognition, wellness programs, welfare...;
  • HR administration: HR personnel, HR software, employee records management...;
  • Other hidden costsidle costs, costs of assets and facilities, etc.
Human resource cost is payments that businesses must make to employeesHuman resource cost is payments that businesses must make to employees.

Is human resource cost important?

Human resource cost is important for several reasons:

  • Financial Management: It allows organizations to allocate resources efficiently, control costs, and make informed decisions regarding workforce planning and investment.
  • Cost Optimization: Understanding human resource costs helps identify areas of inefficiency and opportunities for cost reduction while maintaining a productive workforce.
  • Return on Investment (ROI) Analysis: Human resource costs analysis assesses the effectiveness and value of HR initiatives and programs.
  • Workforce Planning: By analyzing costs associated with different employee categories, organizations can make informed decisions about staffing levels and skill gaps.
  • Competitive Advantage: Properly managing human resource costs contributes to higher productivity, innovation, and customer satisfaction.
  • Compliance and Risk Management: Managing human resource costs helps organizations mitigate legal and regulatory risks.

In summary, human resource cost analysis is crucial for financial management, cost optimization, ROI analysis, workforce planning, competitive advantage, and compliance.

Steps to manage and optimize human resource cost

Currently, a lot of businesses do this control and cut HR costs to increase their profits. Below, let's find out the steps for effective HR cost optimization that are most applied by many units.

Set up a plan to manage human resource cost

Budget planning helps to minimize spending too much and stabilize capital so that businesses can rotate in business. A detailed budget plan will also help each business allocate resources effectively in the face of changes. Besides, this also has the effect of improving the initiative of personnel in work plans and saving as well as optimizing human resource costs.

  • Positioning the business mission: planning the human resources budget following the business targets from which it is possible to adjust, allocate, or implement practical human resource activities.
  • Measure the needs of using budget resources: These needs are the main ones related to human resources such as recruitment costs, training, salary and bonus policies, and other benefits...
  • Setting up a contingency plan: Enterprises create budgets to be able to stand firm in the face of unforeseen difficulties. Typically, the mass recession during the COVID-19 epidemic period.
  • Consider long-term investment sources: This can be an investment in  human resource management software to improve processes and increase the efficiency of internal management at the enterprise.
  • Review feasibility: Businesses should ensure appropriate budgets as well as properly cut unnecessary items to avoid waste.
optimizing Human resource costHR management planning is the first step in the process of optimizing Human resource cost. 

Set a budget for each item of personnel expenses

The implementation of employee expenses in detail is one of the best ways to control human resource costs. This strategy will include establishing and conserving in advance the maximum possible budget for each category of employee cost such as money for business trips, restaurant bills, and purchase of equipment and supplies...

In each type of expense, businesses should let employees know how much they are paid from the company budget and they will of course only be reimbursed if spending is within this limit.

Currently, many basic expenses can be pre-approved by the business, and other out-of-pocket costs require explicit approval from the manager.
Thus, businesses should build a budget for each item of personnel in an easy-to-understand manner as possible. This will make it easier for employees to memorize and memorize them.

Setting a budget for each item of human resource costSetting a budget for each item of human resource cost is extremely necessary.

>>>> More Reference: 8 Effective Strategies to Increase Employee Productivity

Outsourcing non-core activities

Currently, many businesses choose to outsource their activities and jobs. This job has helped businesses cut reductions in fees such as recruitment, training, and insurance…

For example, in the period near Tet, businesses will often need more workers than usual to keep up with a large number of orders. Therefore, many businesses choose to outsource employees to save costs without having to sign a long-term contract.

In addition, businesses instead of choosing to build software themselves, can hire a reputable technology company to write new software or buy existing software to cut unnecessary fees.

optimizing human resource cost: recruitment costsEnterprises choose to outsource human resource services to save costs.

Optimizing recruitment costs

It can be said that the key to an effective recruitment process is optimization, consistency, and synchronicity in human resource cost. Here are a few things that businesses should do to have the most cost-effective recruitment process.

  • Set up a standard calculation formula and apply it to many recruitments for easy evaluation and comparison with previous or subsequent recruitments. If there are new expenses incurred, the enterprise should automatically adjust the formula in close relationship with the old formula and not change too much to make it easier for later comparison.
  • Calculate recurring costs to The HR department can see the overall picture of recruitment activities as well as help businesses grasp the efficiency and improvement in the recruitment process such as assessing the effectiveness of applying recruitment software, and participating in recruitment events. Recruitment events…
  • In addition to the average costs, businesses should calculate the costs for each department or position. Because the cost of hiring a salesperson is different from hiring a marketing person.
  • Calculating costs based on each recruiting source to find the highest or lowest cost of recruitment to compare with the effectiveness of each channel. From there, businesses can eliminate ineffective channels and focus more on important recruitment channels.

Readers can refer to the article 10 effective human resource recruitment solutions after the wave of resignations to understand more how to recruit effectively but still ensure optimal recruitment costs.

optimizing human resource cost: recruitment costsEnterprises are now optimizing recruitment costs.

Optimizing training costs

There are many ways that businesses can apply to optimize employee training costs. Here are a few ways you can help your business:

  • Choose online training to optimize staff training costs, for employees who take online classes or courses to help employees master new skills and tools on the job.
  • Staff training at forums so they can communicate and exchange whenever they want without spending too much money on events, catering, and venues.
  • Use the right employee training system to track employee performance for mutual benefits.
  • Leverage internal resources without the need to hire outside experts. This helps you cut huge costs.

Most importantly, businesses need to develop a detailed employee training plan that is closely related to the business.

optimizing human resource cost: Optimizing training costsOptimizing training costs is one of the most practical activities that businesses need to do.

Optimizing Salary and Bonus policy

The enterprise establishes a salary and bonus policy to ensure fairness for both the enterprise and its employees:

  • Pay salary by working time, by month, day, or hour. Employees will be deducted according to the time off, if they do enough according to the regulations, they will receive full salary.
  • Pay-by-product payments help incentivize workers to increase their productivity while doing their jobs.
  • Payment of wages in the form of a contract means that employees will receive wages according to the amount of work that the company assigns. When the worker completes will be paid the corresponding salary.
  • Salary payment is based on revenue according to the goals and policies of each company. Usually applied to sales staff, sales staff…
  • 3P payment includes salary by title (hard salary), capacity, and work results.
optimizing human resource cost: Optimizing the salary and bonus policyOptimizing the salary and bonus policy is an effective way that businesses should apply.

How can Viindoo software help optimize human resource costs?

Viindoo software optimizes human resource costs through:

  • Work time tracking: Viindoo tracks attendance, manages leave, and monitors work hours, allowing for effective scheduling and resource allocation.
  • Work time tracking: Viindoo tracks attendance, manages leave, and monitors work hours, allowing for effective scheduling and resource allocation.
  • Salary and benefits management: Viindoo calculates, tracks, and manages salary levels, bonuses, and employee benefits, ensuring accurate and fair compensation.
  • Integrated recruitment and HR management: Viindoo streamlines the recruitment process, from job posting to candidate selection, reducing recruitment costs and saving time.
  • Human resource expense budget: Viindoo has a Budget application, that allows users to track and analyze budgets according to details of expense and revenue items. From there, you can easily manage the budget for personnel costs in the total expected budget.

Viindoo software help optimize human resource cost.​Viindoo software help optimize human resource cost.​

Thus, through the above article, it can be seen that if businesses want to develop stably and sustainably, they should plan a detailed budget and optimize their human resource costs. Viindoo hopes this article will be useful for your business journey to come.

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What is Human Resource cost? The secret to optimizing Human Resource costs effectively
Jun Nguyen July 2, 2023

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