As a company, if there’s one lesson you should take from the Coronavirus Pandemic, it’s that in order to stay competitive, businesses need plenty of creativity and resourcefulness. 

After budget slashes, hiring freezes, and more budget slashes, organisations are left with a collective feeling of being beat. But the HR department could play an important role in cost reductions across the organisation.

No matter the department or tribe you belong to as a leader you should be considering both the short term and long term effects of the decisions you make, and the HR department is no exception. 

One example would be headcount reduction helping with cost reduction in the short term, but having longer-term negative effects such as demotivation and anxiety in the other remaining employees, which could then lead to lowered productivity and competitiveness.

In other words, giving plenty of thought to what the right HR reduction cost strategies for your organisation are of utmost importance. Here are a few to consider this 2021.

Pausing big software projects

There’s no reason to just leave this one out to the IT department. Freezing hiring for large software projects can be a smart play at reducing short term costs. You can always reconsider this decision once the IT department has had time to further assess things and determine whether there is sufficient value and funding to continue the project.

Looking into software license renewals  

Speaking of software… many of the software and cloud-based applications that HR and other departments use are licensed based on monthly or annual headcount. It’s important to look into the way these software companies invoice your organisation and ensure that the correct headcount is being used for the equation. 

Maybe you no longer need that whiz bang product you were sold 18 months ago and nobody seems to use? Maybe another program has recently increased functionality such as onboarding or EAP and you no longer need a separate application to do that? 

Reducing outsourcing work to third party companies

Look into things and where possible, department leaders could decide to bring in work done by third-parties in-house. 

It’s easy to overlook some things when we’re occupied by hectic and ongoing processes, but as things have been dwindling to near-stop or slowed down for some industries (or even departments within organisations), there could be enough time to analyse things and see which internal resources are available, what skill sets are required for certain projects, timelines and availabilities, and which ones can be done in-house.

Outsourcing nonessential work

On the flip side if there’s work in your organisation that is nonessential to your day-to-day operations, consider outsourcing it to a third-party. While this move might reduce headcount initially and could even cause a bit of friction, in the long run, it may help your company survive a sharp downturn and prevent more drastic cost cutting and headcount reduction measures. 

Engaging a part-time, temporary or contract workforce

Sometimes a full-time permanent employee is not needed to complete a piece of work and tightly assessing the requirements of each vacancy against the expected deliverables, it’s possible you may discover that instead of hiring a permanent employee, it may be more cost-effective to hire a part-time or contract employee. 

We often see very talented and experienced people (especially women) who have decided to re-enter the workforce after having a child but they can only commit to part-time work. Companies often ignore this highly capable segment of the workforce under the assumption that someone must be working full time in order to deliver value and be effective. 

Questioning this assumption and exploring part-timers can provide a mutual benefit to the company and to those individuals who only can work part-time. 

Hiring Freeze

This is probably one of the most common cost reduction practices and one that is often swiftly implemented within companies in the event of an economic decline. 

Make sure to reevaluate all your open positions because a full freeze might be necessary sometimes, but it will always depend on the situation that your organisation is in. Together with other leaders, you should determine which among your open positions are key roles that require to be filled in a timely manner and how this changes in a rapidly changing work environment. 

Reduce or eliminate (when possible) nonessential external training

While training is essential for both the employees and the organisation as a whole, if circumstances land you in a spot where there isn’t enough funding for them anymore, have a look within your own workforce and see if you have subject matter experts who can fill in the gaps. 

You wouldn’t want to freeze all training altogether, but you can look into reducing the number of sessions given for the year or quarter until the funding opens back up again. 

Encourage employees to use their leave credits

This one doesn’t offer a cash benefit, but having employees use banked leave time, such as annual leave will reduce the company’s debt and exposure during a time where there may not be as many projects happening. 

This is also effective when there are new social distancing rules with office environments and could be an effective way of rotating staff in and out of the office and providing rest during stressful or tumultuous periods. 

Need help finding ways to reduce HR costs this 2021?

Redwolf + Rosch offers a range of services in addition to recruitment, such as team and workforce assessment and HR consulting. 

Contact us via or calling 1300 544 652.