Salary Expense (2 of 2): Cutting Costs - John M. Leask II CPA/ABV, CVA

Salary Expense

Part 2 of a 2 part series

Warning Signs:

    • Rising labor costs as a percent of sales.
    • High turnover of employees.
    • Evidence of inadequate training.

  • Employee/supervisor conflicts.
  • Increase in employee absenteeism/tardiness.
  • Confusion/duplication of effort.
  • Signs that a process needs improvement:
    • Falling profits with stable or growing sales, stable prices and costs.
    • Net sales to total assets out of line with industry averages.
    • Unnecessary duplications.
    • Unneeded income.
    • Bottlenecks.
    • Missing information.
    • Missing resources.
    • Poor morale.
    • Rejects.
    • Customer complaints.
    • Absenteeism.

Steps to Improve: COST CUTTING

  • Eliminate employee overtime.
  • Reshuffle staff duties to control costs.
  • Shave labor costs with part timers.
  • Consider outsourcing positions requiring a few people with high skills.
  • Use independent contractors to slash payroll.
  • Consider leased employees for seasonal employees and busy periods.
  • “Lease” your employees to other businesses.
  • Use temps where advantages exist.
  • Consider contracting out work: overloads; space/equipment limitations.


  • Downsize in hard times.
  • Put a freeze on hiring and routine raises.
  • Shift to six-hour work day.

Back to The Business Doctor

>>Salary Expense (1 of 2): Improving Productivity
>>Salary Expense (2 of 2): Cutting Costs