How Small Changes in Payroll Can Unlock Big Savings for Your Business

Angela had just resumed as the manager of a small marketing firm when she noticed a few issues: the company’s pockets were getting lighter but everything else stayed the same. Productivity was stagnant and the firm wasn’t recording any great changes. 

This was what birthed the change in the firm’s payroll strategy. 

When it comes to running a business, every decision matters. One area where even small adjustments can lead to significant savings is payroll. Most companies think of payroll as a fixed cost, but what if I told you that a shift in approach—paying for value instead of hours—could transform it into a source of savings of sorts? 

In this blog post, we will explore how companies can optimize payroll by focusing on productive hours rather than blanket compensation, and what that means for your bottom line.

The Common Payroll Trap

Most businesses pay their employees for time worked, which they typically measure in hours. To be fair, it makes sense on paper: an employee clocks in, does their job, and clocks out. But here’s the catch: not all hours are created equal. Some hours are filled with meaningful work that drives results, while others? Not so much.

Think about the 9-to-5 workday. Studies show that the average employee is productive for about 3-4 hours daily. If your payroll is set up to pay for all 8 hours without measuring output, you’re essentially paying for time that may not deliver results.

Sometimes, apart from human nature, inefficiencies in workflows, poor task allocation, or even mismanagement of resources create unproductive time too. But what if you could recalibrate how and what you pay for?

Not all hours are created equal—some drive results, while others simply fill the clock.

The Pay-for-Value Approach

The solution lies in shifting from time-based pay to value-based pay. This doesn’t mean cutting salaries arbitrarily; it means structuring compensation around productive hours and measurable outcomes. Here’s a simplified approach:

1. Track Output, Not Just Time: Introduce systems that monitor actual deliverables or contributions of your employees.
2. Optimize Schedules: Allow flexible schedules that encourage your employees to work during their most productive hours.
3. Reward Results: Tie part of employee compensations to their achievements, whether it’s meeting sales targets, completing projects efficiently, or driving innovation.

This strategy aligns payroll costs with the value generated, ensuring that you’re paying for the outcomes that move the business forward.

How can these small changes in your payroll save Money?

Let’s say a small business employs 10 staff members, each earning N2000/hour, for an 8-hour workday. This costs N16,000/day in payroll and about N320,000 per month. 

Now imagine the business evaluates productivity and finds that, on average, employees are only delivering value for 50% of their workday. Essentially, the business is paying N8,000/day for unproductive time.

What exactly you can do to shift to a value-based system?

Rewarding excellence isn’t just good for morale—it’s a strategy that saves costs and fuels growth.

1. Implement flexible schedules that allow employees to work 6 highly focused hours instead of 8 unfocused ones.
2. Introduce a performance-based bonus of N5000/hour for hitting clear targets.

Under this model:

• Employees are paid N2,000/hour for 6 hours of work (N12,000/day).
• Top performers earn an extra N3,000/day in bonuses.

Total daily payroll: N15,000 (N12,000 base pay + N3,000 bonuses). That’s a savings of N1,000/day while increasing overall productivity and morale. Might seem small, but over a year, this adds up to N300,000 in savings for just 10 employees.

Now, if you scale this up to a mid-sized business with 100 employees for example, adopting this approach, they could save up to N2,600,000 annually—money that can be reinvested in growth, technology, or other strategic initiatives.

The Hidden Benefits of Paying for Value

Beyond the direct financial savings, this shift has broader implications for your business.

1. Boosted Morale: Employees who are paid based on their contributions often feel more appreciated and motivated. This approach rewards effort, not just presence.
2. Reduced Turnover: By tying pay to value, you retain high-performing employees who see their efforts rewarded.
3. Increased Efficiency: When payroll reflects productivity, both management and staff are incentivized to streamline workflows, eliminate bottlenecks, and focus on results.
4. Scalability: As your business grows, paying for value helps you maintain control over costs while scaling operations.

Making the Transition

Of course, shifting to a pay-for-value model isn’t an overnight process. It requires planning, clear communication, and the right tools. Here are a few steps to get started:

1. Evaluate Productivity: Use metrics like revenue per employee, output per hour, or task completion rates to assess current productivity levels.
2. Set Clear Goals: Define what “value” looks like for each role. For example, for a salesperson, it might be revenue generated. For a customer support agent, it could be resolution time or customer satisfaction scores.
3. Invest in Technology: Tools like time-tracking software, project management apps, or AI-powered analytics can help measure and reward performance effectively.
4. Communicate Clearly: Ensure employees understand how the new model works, why it’s being implemented, and how it benefits them.

In Conclusion, 

Turn payroll into a tool for productivity and growth.

Payroll is often the largest expense for most businesses, but it doesn’t have to be a burden. By paying for value, you create a system that rewards productivity, reduces waste, and drives results.

The savings are real, but the true impact goes beyond the numbers. You’ll build a culture of accountability and performance, where every naira spent on payroll generates measurable returns. And in today’s competitive business landscape, that’s an edge worth investing in.

So, take a closer look at your payroll. A few small changes might just unlock the big savings your business needs. XDeputy is one of the platforms in Nigeria championing this cause. Don’t take our word for it, see for yourself.