Cut costs, not talent: How employers can manage rising employment costs

1. Understand where your employment costs are going

The first step in controlling employment costs is gaining a clear picture of where the money is going. Businesses should:

• Break down direct labour costs (e.g., wages, bonuses) and indirect labour costs (e.g., HR, admin, training).
• Identify areas where overtime, absenteeism, or low productivity are impacting the budget.
• Compare current spending to industry benchmarks by role or department.
• Use scenario modelling to assess potential changes – factoring in financial, operational, and morale impacts.

“Too often, decisions around staffing are made without full visibility of where inefficiencies lie. When businesses take the time to analyse their workforce structure and costs, they often uncover surprising opportunities for savings that don’t involve redundancies”, says David.

2. Maximise reliefs, allowances and support schemes

Many employers miss out on valuable government support simply because they’re unaware it exists or haven’t reviewed eligibility.

We can help clients:

• Claim the Employment Allowance, where applicable.
• Find apprenticeship funding and training incentives.
• Tap into local council grants or support initiatives for small businesses.

“There are a whole host of tax planning opportunities for employers which we cover in our in annual tax guide here. One immediate opportunity is to assess your eligibility to secure apprentice funding. If you are already training your people you may be able to do so under the apprenticeship scheme and recover the cost of training”, says David.

3. Review your employee benefits programme

Retaining your best talent is more cost-effective than hiring new employees. That’s why it’s crucial to ensure your benefits package is both attractive and cost-efficient.

Affordable and effective benefits may include:

• Salary sacrifice schemes for pensions, electric vehicles or cycle-to-work.
• Low-cost perks, such as wellbeing allowances, flexible working, or recognition schemes.
• Benchmarking benefits against similar-sized businesses to ensure value for money.

“A strategic employee benefits package helps retain key talent without bloating your overheads. It’s about being creative and intentional, not necessarily spending more”, says David

4. Workplace planning: Make your space work smarter

If you are an office-based business, your physical workspace can be a hidden cost centre – or a strategic asset. Rethinking how your space is used can lead to substantial savings and efficiency gains.

• Use occupancy data to understand how desks and meeting rooms are actually used on a daily basis.
• If space is consistently underutilised, consider subletting unused areas (subject to lease terms).
• Reconfigure your floorplan to increase desk density and accommodate growth without expensive relocations. You may consider hotdesking and hybrid working alongside this to allow flexibility while utilising desks space.
• Consider investing in energy-efficient equipment and lighting. Switching to LED lights, energy-efficient HVAC systems, and Energy Star-rated appliances can significantly reduce utility bills over time. Though there’s an upfront cost, the long-term savings and potential tax incentives often make it a smart financial move.

“Many businesses are sitting on underutilised space without realising it. Regularly reviewing how your workspace is used can uncover opportunities to reduce overheads, create room for growth, or even generate additional income – without major capital investment”, says David.

5. Use technology and automation to boost efficiency

Technology shouldn’t be feared – it should be used to empower your team. The right tools can automate time-consuming tasks and free up employees for higher-value activities.

Some areas where technology can drive efficiency:

• Automating administrative processes, such as payroll, timesheets or HR forms.
• Investing in scheduling, booking or time-tracking software.
• Utilising data to make smarter workspace decisions – for instance, assessing desk occupancy to sublet unused space or reconfigure your office layout.

“Technology doesn’t mean replacing people – it can amplify them. By automating the repetitive, businesses free up staff to focus on what really drives value, like client relationships or strategic planning,” says David.

6. Outsource non-core functions

As employment costs increase, especially wages and National Insurance Contributions, outsourcing non-core functions can become a more flexible and cost-effective alternative.

We provide an outsourcing service to look after your functions, including:

• Payroll
• Bookkeeping
• Interim CFO

Outsourcing can free up your internal team to focus on strategic growth and customer service, while also reducing your fixed employment costs.

“Outsourcing is no longer just about cutting costs – it’s about gaining expertise and agility. It lets businesses scale more flexibly, especially in uncertain economic times,” says David.