Running a company is no walk in the park. Add a tight labor market and rising inflation to the mix, and your stress levels are at an all-time high. After all, the goal of any business is to turn a profit by generating revenue and keeping overhead expenses low without jeopardizing your company’s operating efficiency.
And one of the highest costs of doing business is labor. Yet surprisingly, only 15% of company leaders spend their time managing labor costs. Let’s dive into four ways to control your tech staffing costs while keeping your company running like a well-oiled machine.
Reorganize your existing team
When you’re running a business, there are many costs to manage throughout the year. Some of these expenses are inevitable. But when it comes to tech staffing costs, how do you keep them at bay without sacrificing talent and productivity?
Start by creating a well-distributed organizational structure by avoiding top-heavy roles and building a solid foundation of employees from the ground up. You don’t want too many generals at the top and not enough soldiers to do the work. A top-heavy organizational structure yields low employee engagement and enthusiasm.
So instead of always hiring expensive senior engineers, consider hiring and investing in the growth of middle and junior developers. This simple switch-up will increase employee engagement, save costs, and balance your organizational structure. It is a win-win situation.
Undoubtedly, an investment in middle engineers is a long-term play. For example, the next time you have turnover in a more senior role, you already have a top-quality candidate in the pipeline for promotion. Promoting an employee from within is up to 30% cheaper than hiring externally. To top it all off, they’re already familiar with your company and culture, which is the ideal candidate for the job and saves you money on training and onboarding.
If you are in a pickle for headcount, consider hiring contract software developers to fill your in-demand entry-level roles. Hiring an independent contractor is cheaper than hiring an in-house employee because you don’t need to all the taxes like for in-house employees, provide office and gadgets, or different bonuses and benefits. But don’t let these contract workers slack off. It’s important to keep a close eye on them to ensure that you’re only paying them when they’re working on essential projects and not dragging out a task for longer than necessary.
Reduce employee turnover
Employee turnover is a massive drain on your company’s resources, and it can have a significant impact on your bottom line. It costs money to hire, onboard, train, and replace employees who leave their positions.
According to a study by the Society for Human Resource Management, it can cost a company anywhere from three to four times the salary to replace an employee. That means an employee making $60,000 could cost your company $180,000 to hire and train a replacement. Yikes.
To reduce employee turnover, provide internal development opportunities for employees whenever possible. Your employees are the backbone of your business, and a robust employee development program is the key to making sure they’re happy, productive, and loyal to your company. Talking in numbers, 40% of employees with poor training will leave the company within the first year, while 93% of employees would stay at a company longer if it invests in their skills and career development.
Additionally, creating well-defined roles within your organization will help reduce turnover by giving employees clear expectations about what success looks like and how they can achieve it. Never underestimate the power of recognition. Keep your employees motivated by implementing an employee recognition program. When you show your employees how much they mean to you, they’ll feel inspired to give their all for you.
And it works. When employees are recognized for their achievements, they’re:
- 5x less likely to leave the organization
- 44% more satisfied with their job
- 4x more engaged at work
- 5x more connected to the workplace culture
Reevaluate your hiring process
When you do your own recruiting, you cut out the intermediary and avoid paying recruiters a steep fee equal to 15–20% of the candidate’s salary. Ouch.
Instead, you can invest in your own recruiting initiatives by creating a well-structured recruitment and vetting process. The best people to review resumes, conduct interviews, and evaluate tech candidates are those with good experience at your company. They know exactly what tech and soft skills are required for each position and can interview candidates effectively based on filling those needs.
With the current demand for certain tech positions, consider offering sign-on bonuses to attract top talent. Yes, this sounds counterintuitive. But in reality, it’ll save you money down the road.
Signing bonuses can make a lower base salary more attractive to candidates. It’s a great way to get them in the door without leaving an open position empty for too long.
Research also shows that 61% of employees expect higher pay if required to work in an office vs. a remote position. So a signing bonus is a great way to offset this difference if a return-to-office strategy is essential to your team.
You can also consider using a specific platforms/marketplaces for hiring remote developers. Firstly, compared to general recruiters, they are more proficient in finding, evaluating and hiring software engineers. Secondly, that would be cheaper to hire a full-time contract engineer with all needed skills then look for and hire in-house developers.
Sometimes less is more. With the help of automation, you spend less time on tedious tasks, reduce the risk of human error, and improve the quality and accuracy of your team’s work. All without hiring an additional headcount.
To get this right, determine what roles or processes can benefit from automation. Have your team compile a list of manual processes in their daily, monthly, or weekly workflows. Replacing tedious processes with an app, web form, or machine learning technology like test data generation can save you time and money if it is a tried and true process. For example, using an advanced AI chatbot to troubleshoot technical problems will reduce your need to hire junior technicians/service professionals to respond to general customer inquiries.
From project management to error testing, there are plenty of automation tools available to help streamline your manual workflows and save your company money. In fact, almost 50% of teams that prioritize process automation see a cost reduction of 11–30%.
There’s a constant debate over the build vs. buy dilemma. Is it most cost-effective to build automation tools in-house or outsource?
To help make it a bit easier for you, consider using the “buy” method for anything your employees need to perform their core functions, but that doesn’t impede your competitive advantage.
It’s a common misconception that automation is more expensive than manual processes. But you should consider the cost of deploying and maintaining automation vs. manual processes.
The key to keeping your tech staffing costs under control is being proactive. Start by looking deep into your current organizational structure. Do you see a uniformed pyramid, or is it too top-heavy? Is your turnover rate higher than in prior years? Are you using the appropriate automation tools? Are you paying recruiters hefty fees for low-quality candidates?
Keeping these questions at the forefront of your mind will help keep your costs from ballooning in the future. As time goes on, you’ll have a better sense of how to maintain a positive ROI on your investment in tech staffing.
Don’t let your overhead costs run rampant. Keep your eye on the prize, focus on your company’s growth trajectory, and avoid overspending on unnecessary tech talent along the way.
And if you consider going offshore to hire tech talent abroad, read our previous article about estimating offshore software development cost.