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How to optimise your workforce costs- 5 questions your CFO must answer

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“Price crashes across various natural resources have unleashed a concerted push by technical engineering companies to reconfigure their own organisations. These companies had been chasing production; now they’re chasing efficiencies.”

Cast your mind back to June 2014. You’ll recall the oil price began to waver. Experiencing a precipitous drop, the price landed at $29 a barrel by January 2016 from its previously heady heights of $107. During the same period the spot price of iron ore was also in free fall, dropping from $80 to $40 per tonne. How would the world’s technical engineering industries respond?

The first solution- cut wages and supplier rates.

Many companies failed to take a ‘macro’ view. Cost reduction initiatives were viewed in isolation. As a result of companies focusing on the ‘micro’ view, both contractor workforces and supplier margins were affected. It was common to see cuts of 15-20% off the daily rate of contractors. Some suppliers halved their costs. Others cut further still and aren’t around to share their stories.

Racing to the bottom favours no one. And yet it’s still happening. Why? Because many operators don’t realise there are better ways to reduce costs and improve efficiencies. Approaching cost reductions strategically can produce rapid, sustainable savings across the short, medium and long term for your business.

The 5 questions your CFO must answer

Given the need for technical engineering companies to cut their costs and optimise their workforces, here are 5 key questions for you to consider to check if your organisation has a fully transparent view of actual contractor workforce costs (both indirect and direct).

1.       Do you regularly review how and where you could reduce your costs for contractors?

Since the oil price began to collapse in 2014 traditional cost cutting measures have been in full flow. But have these approaches reached their limit? Can you continue to reduce supplier costs? Can you really shave a further 5% off contractor rates? Are you aware of the 10 other strategic initiatives that your company could take to identify and reduce hidden costs?

2.       Have you considered the benefits of consolidated invoicing or contractor furlough?

In addition, there are proven strategies focusing on reducing your payroll costs, optimisation or your supply chain and the removal of risks around contractor compliance (e.g. qualifications, insurances and work eligibility).

3.       Have you considered reducing your costs by consolidating suppliers and outsourcing your recruitment services to a single supplier?

There’s two options. Reduce costs and run everything through one supplier, or maintain your current suppliers and have one overarching supplier supporting your decisions around cost-efficiencies.

4.       How about online timesheet and expense management for your contractors?

The traditional approach of manual end-to-end timesheet processing can cost upwards of $17.50 per timesheet. Online timesheet processing eliminates the manual work involved therefore significantly reducing your costs.

5.       Would detailed management information about your contractor workforce help you optimise your costs?

You can put yourself back in control of your spend by analysing hidden costs and overall workforce expenditure. Plan ahead and identify where excessive costs may appear thanks to detailed management information.

If you’ve not considered these questions before, then carry on reading...

What impact would reducing your supplier costs by 43% over the next 12 months have on your business? How would potential savings in excess of $3.5m through the optimisation of your supply chain look to you? If you believe this is something worth looking at, we’d be happy to share some customer insights with you.

Like your competitors, you’ve probably considered some of the above. Are your recruitment suppliers thinking strategically with you and helping you gain control? Fircroft can help you.

For further information, contact Tom Cook at / +44 1925 281561

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How to optimise your workforce costs- 5 questions your CFO must answer - Time to read 3 min
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