Running a company can be challenging, especially in a tight labor market with rising inflation. To ensure profitability and operational efficiency, it’s crucial to control tech staffing costs. This article explores four strategies for achieving this while maintaining productivity.
Reorganize your existing team
Managing costs is a critical aspect of running a business, and while some expenses are unavoidable, controlling tech staffing costs without compromising talent and productivity is a challenge worth addressing.
One effective approach is to establish a well-balanced organizational structure, steering clear of top-heavy roles and focusing on building a solid foundation of employees. A disproportionate number of high-level executives can lead to low employee engagement and enthusiasm. By opting to hire and invest in the growth of middle and junior developers instead of exclusively relying on expensive senior engineers, companies can enhance employee engagement, reduce costs, and achieve a more balanced organizational structure. This approach presents a win-win situation.
Investing in middle engineers also offers long-term benefits. When a senior role becomes vacant, having a qualified candidate already in the pipeline for promotion saves up to 30% compared to external hires. Additionally, internal candidates are already familiar with the company culture, reducing expenses related to training and onboarding.
For organizations facing headcount challenges, hiring contract software developers to fill entry-level positions can be a viable solution. Independent contractors are a more cost-effective option than in-house employees since they do not require taxes, office space, gadgets, or additional bonuses and benefits. However, it is crucial to closely monitor contract workers to ensure they focus on essential projects and avoid unnecessary delays.
Reduce employee turnover
Employee turnover is a significant drain on company resources, impacting the bottom line. Replacing employees entails costs for hiring, onboarding, training, and their salaries.
According to the Society for Human Resource Management, it can cost three to four times an employee’s salary to replace them. For example, replacing a $60,000 employee could cost $180,000. To mitigate turnover, provide internal development opportunities and prioritize employee training and career growth. Companies investing in their employees’ skills and development have higher retention rates, with 93% of employees staying longer. Regular appreciation, bonuses, and recognition programs foster employee engagement and motivation.
Recognized employees are:
- 5x less likely to leave
- 44% more satisfied with their job
- 4x more engaged at work
- 5x more connected to the workplace culture
Creating well-defined roles and setting clear expectations further reduces turnover and enhances employee success and satisfaction.
Reevaluate your hiring process
When you handle your own recruitment, you avoid costly fees paid to recruiters, which can be 15–20% of a candidate’s salary. Build a well-structured recruitment process using experienced employees within your company to review resumes, conduct interviews, and evaluate tech candidates based on the required skills.
To attract top talent in high-demand tech positions, consider offering sign-on bonuses. Despite seeming counterintuitive, this approach saves money in the long run. Signing bonuses make a lower base salary more enticing and help fill positions quickly.
If you require employees to work in an office rather than remotely, offering a signing bonus can offset the salary expectations of 61% of employees who expect higher pay for office work.
Using specialized platforms or marketplaces for hiring remote developers can be cost-effective and efficient, as they have expertise in finding and evaluating software engineers.
Leverage automation
Automation offers the benefits of time savings, reduced errors, and improved work quality without the need for additional hires. To leverage automation effectively, identify tasks or roles that can benefit from it. Compile a list of manual processes and replace them with apps, web forms, or machine learning technologies like test data generation. For instance, employing an AI chatbot reduces the need for junior technicians to handle customer inquiries.
Automation tools are available for various areas, from project management to error testing, resulting in significant cost reductions of 11–30% for teams that prioritize automation. When considering automation, weigh the cost of development and maintenance against the expenses of manual processes. For core functions that don’t impact your competitive advantage, buying pre-built automation tools can be a cost-effective choice.
Wrapping up
To control tech staffing costs, be proactive. Assess your organizational structure, turnover rate, automation tools, and recruitment expenses. Stay mindful of these factors to prevent costs from escalating. Aim for a positive return on investment in tech staffing by aligning with your company’s growth trajectory. Avoid excessive spending on unnecessary talent and keep overhead costs in check. If offshore hiring is an option, refer to our previous article on estimating offshore software development costs.
