Managing the hidden costs of HR

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hidden costs of HR
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Hidden cost is something that every business is afraid of, be it a small enterprise or an established giant. These ambiguous costs not only eat up profits but also drive a business towards disaster eventually throwing it off the track.

When talking about a company’s biggest asset i.e. its employees, human resources management is the first thing to pop in our heads. This is the reason an increasing number of businesses are waking up to the idea of taming hidden HR costs.

We are living in the age of automation, where customer queries are answered in a matter of seconds. This applies to all those queries that employees put forth to the HR. Since we are dealing with millennials, who happen to dominate the workforce, it is imperative for HR to respond to their queries in a prompt way.

Unlike their predecessors, millennials tend to have a whole different set of priorities and expectations and tend to quit if they are not met. In order to counter this, companies force their HR department to search for high potential candidates, who do not leave the organization too early. This leads to an increase in HR costs.

Here are more such common yet hidden HR costs:

  1. Turnover costs: Hiring an employee costs up to 60% of his/her salary. This is a big deal for any company or recruiting team especially if they abscond without any reason or do not wish to be employed anymore. Now to retain such employees, the management ought to consider a few options like promoting them or increasing their pay, which again increases the budget for the company. To save hidden cost a company pays for high turnover, HR can promote in-house hiring. This motivates employees to try a different growth path while reducing the costs of employee turnover.
  2. Cost of payroll processing: Many small industries or companies have manual payroll processing or use a homegrown standalone software to get the job done. It includes handling too many 3rdparty applications that can lead to data loss and not to mention the cost incurred to maintain such a system. This precious time could rather be focused on some other work that would involve enriching the workplace and employee engagement to name a few. Automated payroll software can help in catering to all the demanding payroll needs by streamlining all pay data delivering better returns on investment.
  3. Importing resources: For specialized work, companies often need to bring in resources from outside their country resulting in a huge cost borne by the company in visas, tickets, and relocation. If the resource leaves earlier than expected, it is definitely a waste of money and time for the company. To mitigate such HR costs, companies can choose to outsource or hire freelancers or hire contractual employees to curb the blow if they were to leave the company or project early.
  4. Employee engagement activities: Employee engagement is a necessity to keep the interests and morals of their employees up. Activities like team parties, team outings, reimbursements, prizes, awards are a way to keep the workforce engaged and make them feel good. If not executed aptly, these can put a dent in the HR budget. To curb such costs, you could combine two or more activities. Being smart is the key here. You could also have your employees volunteer to host engaging activities.

A job of HR is often underrated. Contrary to this misbelief, HR is important for developing your workforce and if they are stuck with manual entries for payroll and attendance, then a business is simply missing the point here. This is why investing in an end-to-end HR software makes sense. Pocket HRMS is one such HR software that helps you automate and streamline critical HR chores thus, freeing up your HR whilst helping you tame hidden HR costs. To know more, reach us here. You can  write to us at

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