COVID-19. You cannot escape this word anywhere you look in todays society. Companies are in a difficult spot to balance both employee health/safety and keeping the business afloat from a financial perspective. In these times a company’s HR department becomes a key advocate for employees and can be a place for employees to turn to with various questions on ever evolving company practices and policies. An engaged and proactive HR department can be the difference between happy employees or ones that are utterly confused and frustrated.

When we think of HR we tend to always think about employee relations and the department you go to with questions about your paycheck or benefits. While those are definitely components to the HR organization there is so much more that does not meet the eye. From a procurement lens there is a lot that touches the HR department in terms of cost. A few that quickly come to mind are payroll administration, benefits and retirement plan administration. In an era of companies trying to cut costs to stay in business or avoid headcount reductions it is important to think about the other levers available when trying to reduce costs. Many organizations are opting to slash the employer match for 401k plans or reducing employee pay by 10-20%. Before taking these drastic employee morale draining measures, companies should look at the costs that they are paying for these services. There is always an administration cost to have a payroll vendor or retirement plan vendor but many companies are not keenly aware of what these costs actually are. These costs can sometimes range between 1-5% of the total payroll or 401k program meaning more cost for the organization. Negotiating these costs and partnering with a strategic supplier in this area may enable companies to not have to take such drastic measures in these times. Saving 1% on retirement plan administration could mean a company is able to keep the employee match but potentially reduce it slightly versus slashing it altogether. Reducing a payroll vendor fees or certain services that are not deemed essential could enable up to a 5% reduction helping to potentially offset employee salary cuts.

The point in all of this is to think creatively about cost reductions and how you can leverage the suppliers you have in the marketplace to collaborate and work with you in these difficult times. The goal is not to just merely ask for a reduction but to have a productive conversation about the challenges your organization is facing and how they as a supplier can help you keep your employees on payroll and minimize any reduction in benefits. Employee morale is key in these times when everyone is experiencing some form of difficulty and change to their normal. Keeping employees engaged, happy and informed are all key ways for long term employee retention. When the dust settles and we start to get back to a new normal do you want to be remembered as the organization that cut benefits and payroll in a time where they are needed the most or one that thought creatively as to how to leverage other pieces of the cost equation to keep core obligations consistent? Employees will surely remember this time and start to think about their workplaces in a new light based on the decisions that are made.   

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Samer Ijaz

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