Many software development companies are looking for ways to reduce labor costs. In general, the evidence offered by Statista indicates that labor costs constitute about 70% of all correlated business costs. With that in mind, when a company knows how to reduce labor costs without reducing staff, chances are high that it will succeed during the times of uncertainty we are living in. Further, we will explore some sure-fire ways of IT cost reduction to let your company reduce spending.

Manage schedules and working hours

The initial step in cost reduction is about optimizing working hours and schedules. Bloomberg offers us to take a look at the case of Iceland: The country has managed to introduce cutting working hours policies without production losses. The piece suggests that people who work fewer hours experience less burnout. It has had a long-term benefit, which eventually led to labor cost reduction. Experimenting with working hours and scheduling can be a way to achieve IT cost reduction in your organization as well

You can save money by turning your full-time jobs into part-time ones. Simply put, you can have two part-time employees sharing a full-time schedule. This approach proved to reduce labor costs and lead to cutting down maintenance expenses associated with office space management. What is more, if your employees work particular schedules, make certain they are predictable. Post the schedules in advance, and always offer rest time. It’s best not to push employees to work 12-hour shifts. Keep in mind that an exhausted employee is always a less productive one. 

Improve team retention

Another way to cut labor costs is to decrease employee turnover. Forbes suggests that employee turnover can be dealt with through training and coaching. The general rule is that hiring new employees is more costly than retaining the ones you have. To reduce turnover and retain the talent you can use a variety of approaches. 

You can generally decrease turnover and boost productivity by enabling your employees to swap shifts and participate in schedule management. Besides, when you meet with workers, give them a word of motivation and commend their contribution to organizational success. Finally, make certain the wellness of your employees is taken into consideration. Keep it in check and ensure your workers are in good mental and physical health. While these factors might need expenditures in the short term, they will lead to IT cost reduction in the long term. 

Promote performance with incentives 

The following strategy is about promoting certain behaviors among employees. For example, you can implement a system of bonuses or commissions to motivate top performers. To do that, you must have a performance metric with KPIs identified. When employees are most productive, you will get projects delivered faster. In such a case, with faster-to-market delivery, you have higher profits from your company’s services. As a result, paying smaller amounts to promote performance pays off on a broader scale, leading to labor cost reduction

Apply innovation

It’s hardly possible to reduce development costs significantly without the help of technology. Instruments offering automation help decrease the workload and substitute human labor hours. Paying for software and doing mundane tasks instead of employees reduces labor costs. This is the very essence of what automation is there for. You can hire an analyst and pay a hefty fee or use the help of a digital platform created to do just so. By definition, technology and innovation are aimed to reduce labor costs. And it also transforms the entire job market, as Harvard Business Review puts it.

IT cost reduction: Hire from a global talent pool

Finally, don’t forget that you have access to the global talent pool as an alternative to costly local hires. You can always opt in for offshoring if you are looking for ways to extend your software development team in an affordable zone. Hiring professionals from other countries is a great way to reduce labor costs. An average software developer based in the USA earns more than their counterparts residing in Eastern Europe or Latin America. 

We at nCube can help you build your nearshore or offshore tech unit consisting of skilled and experienced software developers. If you’re looking for ways of IT cost reduction while working with seasoned engineers, contact us. 

How to reduce labor costs: Key takeaways

To reduce labor costs, you need to work on several things. First, you need to manage your team’s scheduling. You can also improve your employees’ retention rates. Besides, focus on performance boost with incentives and use the power of technologies. And most importantly, don’t avoid the chance to tap into the global talent pool.

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