Tips to reduce your payroll costs

Many times, we think that layoff of employees could be the solution to reduce costs, but is this the best option? For many people, payroll cost reduction must occur via layoff; however, it is not the most recommended measure, as it implies in loss of workforce and production capacity. There is other way to reduce payroll costs, and before firing collaborators and losing production labor force, check some tips below.

1 – Optimize working hours

Optimizing working hours surely is one of the best ways to reduce payroll costs. With good planning, you may raise the productivity of talents. This is also an interesting way to prevent overtime, by making the collaborators work more in less time. In regard to this matter, it is interesting that the management monitors the working hours to assure team productivity.

2 – Creation of compensatory time off regime

In many companies, overtime is an element that contributes for increasing payroll costs. A good solution to solve this issue is creating a compensatory time off regime, and instead of paying 80-hour overtime, for example, the company may grant 10-day leave to that employee. This measure reduces costs, and also make employees even more motivated, as they may extend some holidays.

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3 – Taxation regime more suitable to the company profile

Usually, the companies take into account only the tax rates charged on income when considering the best taxation regime to be adopted. But the taxation regime also influences the amount to be paid in payroll. A company with an income of X and that chooses for the Simples Nacional taxation regime, must pay a single rate, which already encompasses the employer’ duties. On the other hand, a company that chooses for the Lucro Real or Lucro Presumido taxation regime will have specific rates for the employer’s duties. Therefore, it is interesting to review the rates in each regime and evaluate how each one of them will help to reduce payroll costs.

4) Home office option

Another option to reduce payroll costs is to bet in home office. This option enables that the employee works remotely and also provides many benefits to the company as cost reduction. In addition, the payroll expenses reduction is notorious, as this regime does not require payment for transportation allowance, because the employee does not have to commute to the workplace. The choice for home office brings to the company the additional benefit of savings in power, water, and cleaning materials, for example.

Drummond is prepared to assist your company in all the issues related to payroll and taxation regime; in case of any questions, do not hesitate in consulting us.

Written by Murilo Fontoura, Personnel Department Supervisor at Drummond Advisors