Category Archives: Overtime

5 Signs that you may need a new shift schedule

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Shift schedules rarely fail overnight.  Typically, there are plenty of warning signs; signs that tell you to take action before it’s too late.  Here are the 5 biggest warning signs.

#1: You have idle equipment while still not producing enough to meet customer demands.  There can be a lot of reasons for this; nearly all of which point to a schedule that does not have the right people in the right place at the right time.  Product flow, staffing, maintenance and production order variability can all be addressed with the right shiftwork structure.

#2: Maintenance is blaming equipment availability for a downward trend in equipment up-time.  You can’t fix something while it’s running.  The result is often and solution like “We’ll wait until the weekend to fix it.”  This is fine until you find that leaving too much to the weekend ends up with an overly fatigued maintenance group with not enough hours on the weekend to fix everything.  Scheduling equipment, like scheduling people, can improve maintenance accomplishment while still getting the production hours you need.

#3: Absenteeism is going up as overtime starts to wear down your workforce.  As overtime goes up, two things will happen.  First of all, your workforce will start to get tired.  Secondly, they will notice that they are now making a lot of money and can afford to take time off.  This is a “death spiral”  situation in that it is self-perpetuating and will only get worse.  Staffing will impact overtime but to do so effectively, you must have a shiftwork structure to support the newly resized workforce.

#4: Local competition for labor is causing problems with recruitment and retention.  I can’t tell you how many times I’ve heard something like “Amazon just opened a mega-facility down the street and is hiring all of our employees away from us.”  The right schedule, one that is a good fit for your workforce as well as your business can help with this.  If wages are a concern, look for ways to get overtime to that 20% of your workforce that wants all they can get.  Overtime costs your company about the same as fully loaded straight time.  This means when you pay overtime, your employees make 50% more but your cost per hour is virtually unaffected.  Don’t lose your workforce because of wage pressures or quality of life issues.  The right shiftwork structure can help.

#5: Productivity metrics are dropping as equipment runtime-hours are on the rise.  If you are running more an more hours with the same old schedule, then you are probably seeing an increase in overtime.  While overtime is not a bad idea in many instances, it can eventually lead to worker fatigue.  This is especially true if you spread it evenly across all shifts.  Remember, not all employees want the same amount of overtime.  As fatigue goes up, so will accidents, quality issues and absenteeism.  You make find, for example, that running 6 days a week yields more output than running 5 days.  However, if you didn’t change schedules, a 20% increase in runtime will yield significantly less than a 20% increase in output.

In summary, don’t underestimate the impact of having the right shiftwork structure.  Fixing this issue is often the most expeditious and cost effective way of improving your overall operations.

For more information, call me, Jim Dillingham, at (415) 265-1621 or drop me a line at Jim@shift-work.com

The impact of overtime on salaried personnel

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Since president Obama signed (28 May 2016) legislation raising the minimum bar for salaried people to qualify for overtime, I have been getting two questions: (1) What does this mean and (2) How does it affect my shiftwork operation.

The answer to the first if fairly straight forward.  If you have a salaried person at your facility that is being paid less than $47, 476 a year, then you must pay overtime at the rate of time and one-half for all hours worked in excess of 40 in a pay week.

The second is less clear.  My hope is that a few observations on my part will help you to see the impact for your operation.

First of all, I will be speaking to the roll of direct supervision of hourly employees in a shiftwork operation.  This is often an industrial setting but need not be so.

Supervisors are typically salaried.  Sometimes they are home-grown in that they come from the existing hourly workforce.  Sometimes they are brought in from the outside.

This new overtime rule means that if you are paying your supervisors less than about $26 an hour, then you must pay them overtime when they work over 40 hours in a week.

Let’s be clear, someone coming to work for a wage or any other benefit represents and agreement between two parties: (1) the employer and (2) the employee.

The employer says “I will compensate you this way if you work here.”  The employee says “I will work there for this compensation.”

To this extent, the law may be self correcting.  Employers faced with paying overtime may offer a lower starting salary while employees, may accept a lower starting salary knowing that overtime will be added to it.

Now, “compensation” can mean a lot of things.  Historically, being promoted to a supervision role means that you get more money per hour.  However, this does not always correspond to “more money overall.”  Frequently, supervisors get a higher hourly rate (paid as salary) but then lose out on what may have been a significant amount of income from overtime; overtime they are no longer eligible for.  There is no shortage of people that have turned down salaried roles because they didn’t want the pay cut.

Management often argues, correctly, that the compensation for supervision goes beyond wages.  Salaried positions often make “decision makers” out of “decision takers.”  For many, the draw of a position of responsibility can be huge.

Salaried positions sometime pay overtime-type wages if you come in on a day off while not paying it if you work a longer than scheduled day.

Salaried positions sometimes offer compensatory time off if you work extra hours.

Managers hire a salaried person and tell them “This amount of salary includes compensation for the expected extra hours you will work.”  In other words, they are saying that they are building the overtime wages into the offered salary.

Maybe there is a company car or free lunches or better vacation.

Probably one of the biggest reasons someone will take on a salaried position is that it represents a stepping stone to something even bigger; perhaps a promotion to the level of really big dollars.

In the end, it still comes down to the agreement.  Compensation = Filled Position.

If you are paying your supervisor less than $47,476 per year,  then I have to say, “You get what you pay for.”  I know that can be harsh in certain markets that only provide the thinnest of margins.  Still, good leaders are hard to come by.  There is competition for them and if you don’t pay them enough, they will leave for greener pastures.

Of all the companies I have worked with over the last 28 years, probably none of them paid less than the $47K bar set for overtime wages (in today’s dollars).  Discussion about this law states that it protects 4.2 million salaried employees.  In truth, they may be protected but are probably not affected.

In short, the impact of this law is far more political than practical.  Chances are great that you will be unaffected in some major way.

Shift Schedules for the Food Manufacturing Industry

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Shift work – The more you learn about it, the more you find out how much you didn’t know.

I have friends that know very little about what I do for a living.  When I say “I evaluate, design and implement shift schedules,” they will respond with “Aren’t all shift schedules basically the same?”

I will respond with something neutral like “sometimes” and leave it at that.  They are laymen who are not involved in the business of running a business that needs to cover something other than Monday through Friday, day shift.

However, if you are in that business, the business using shift work, then you know what I’m saying when I tell you, “There is far more to shift work than schedules.”

To this end, I have decided to write a series of blogs that talk about how shift work varies from one industry to the other.

I will start with the Food Manufacturing Industry.

The one thing that sets the Food Manufacturing Industry apart from all others is the need to sanitize.  Depending on the nature of their product and process, this can mean shutting down weekly or even daily for several hours to clean.

Most companies over-clean.  They do this because their shift schedule makes them do it.

Over-cleaning creates overtime.  It increases costs and eats into valuable capacity (it’s not unusual for a food production line to cost well over $10 million.)

How does the schedule make them do this?

Following a typical growth pattern for most industries, they handled expansion through a combination of capital acquisition and the addition of afternoon and night shifts.  They plan for 5-day operations and base their capacity on that.

Now, let’s take a 3 typical sanitation requirements and see how a schedule affects them.

  1. You must clean when you shut down.  This requirement has nothing to do with periodicity.  So, if you shut down every day, then you must clean every day.  If you shut down once a week, then you must clean once a week.  If you never shut down, then you must never clean due to this requirement alone.
  2. You must clean when you change products, especially if allergens are part of the equation.  If you are running, for example, 5 lines Monday through Friday and you need to convert one of the lines over to peanut-free, then you must shut down that line and clean it.  This takes that expensive line out of the production mode which means (assuming you need the production) either weekend work or the need to buy more capital.  If you had an idle line, you could simply set up that line and then shift to it when needed.  A better schedule can make this happen.
  3. You must shut down based on a biological emergence rate.  Bacteria become a hazard in a very predictable time frame based on conditions.  The same is true for a number of other pests. The schedule being worked has no impact on this.

Let’s suppose that in you operation, you are running 7 lines for 5 days.  This means you are using 35 line-days a week.

Suppose you went to running 5 lines for 7 days a week.  This still gives you 35 line-days a week.  However, this also addresses the first two issues above.  Running 24/7 on a line means you no longer have to clean a line weekly just because you are shutting down weekly.  It also frees up other lines so you can switch from one line to the other without experiencing lost production time.

So, just looking at sanitation alone, we can see that just changing from 5 day operation to 7 day operation can save capacity and eliminate over-sanitation.

Freeing up extra lines also allows maintenance to work on equipment without having to wait until the weekend (where they now try to do a week’s work in 2 days.)

Freeing up extra line also allows you to do setups on one line while the other line is running.  You can then shift to the newly set up line without losing production.

Does this mean that you should be running your operation 24/7?

It’s never that easy.  Food Manufacturing has a lot of moving parts, schedule-wise.  Sanitation aside there is also seasonality, new product introduction etc.

The best schedule is one that carefully considers everything from both a business and an employee perspective.  Every industry is unique.  Every company is unique.  Every facility is unique.

It should not come as a surprise that every shift work solution is unique as well.

My name is Jim Dillingham.  If you have any questions, please call me at (415) 265-1621 or send me an email at Jim@shift-work.com.

How many people does it take to staff your schedule? (Part 2)

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There is a short answer and a long answer to this question.  Here is a link to the short answer.

Now for the long answer:

Take a look at the “short answer” in the previous blog post.  That is a good place to start.

The following should be considered to refine the number you get using the “short answer”:

  1. The cost of full time labor matters.  How much does it cost you to pay someone for an hour of straight time?  How much does it cost you to pay for an hour of overtime?  I am not talking about “how much an employee receives.”  I’m talking about cost-to-the-company.  If you do the analysis correctly, you should find that the two costs (overtime and straight time) are within 10% of each other.  This is important because the amount of overtime you use will play a big factor in staffing levels.  For a fixed workload, the higher the overtime, the lower the staffing level you need.

  2. How much training does it take to qualify an employee for a position.  It is likely that there is a wide variance on this with regards to different positions.  Do Not use and “average”.  If you need an astrophysicist and a box stacker, an average will give you a bad number (4 years of post-graduate study for the physicist and 5 minutes for the stacker = about 2 years, on average, to train an employee).  Long training times lead to an increased use of overtime and less reliance on other labor options such as temporary help.  If your workforce is staffed with highly  skilled people, whose skills are easily transferable to another nearby company, then you will have to bend a more towards compensation scheduling and employee preferences for overtime so as to not lose these people.

  3. How variable is your workload?  If your workload level is flat, you will still have some fluctuations in staffing as people are on vacation or FMLA etc.  When staffing fluctuates, you have have extra staffing available or you can use overtime or you can reduce production.  Cost, degree of variability, employee preference and the nature of your operations will all play a role in determining how you staff for variability.   Its worth noting here that the most expensive option is to over-staff or staff for peak production as this leads to frequent over-staffing which is costly. A highly variable workload tends to mean lower staffing and higher overtime.

  4. How available are alternative sources of labor?  It your workforce pro-overtime or overtime-adverse?  Is temporary or part time labor available? If you are in Memphis and need temporary, highly skill forklift drivers, there are temp. agencies that can give you all this type of labor that you want.  However, if you need those same temporary skill in San Francisco, you may need to “grow your own.”  Can you scale back with seasonality by using shorter work weeks or voluntary layoffs?  Note: If the answer is no, the staff to the lower end and use overtime when things get busy.

  5. What about support activities?  Things like maintenance, engineering, quality shipping/receiving and administration all need to be staffed appropriately as you grow (or shrink).  There is no simple formula for how to staff these as there is often not a “straight line” relationship between staffing numbers in operations and staffing numbers for support areas.  For example, a 30% increase in operation staffing does not mean you need 30% more CFO’s.  In some areas, you may actually find that you need fewer support staff.  For example, maintenance struggles to fix everything on the weekend but if you go to a 24/7 schedule, maintenance can now take place any time in the week; including weekdays where it can be performed more efficiently.

  6. Are you LEAN?  It’s “old school” to think you should stockpile between cells in a value stream ensure you never run out of product either upstream or downstream.  Instead, just-in-time is what modern operations strive for.  Many companies can maximize or throttle production using staffing alone.   This may mean you staff an area below its maximum capacity to enure it does not outrun its value stream neighbors.

  7. What is the opportunity cost of lost time?  This must be a consideration if you are going to staff with as few people as possible.  You may save a lot of money by having fewer maintenance specialists but then you might lose even more money if you suffer downtime because you are understaffed.

Staffing is at least as important as that next piece of equipment you are considering.  The right number of the right people will impact your cost structure at several different levels.  It will impact labor costs.  It will impact quality.  It will impact volume.  It will impact turnover and absenteeism.  It will impact your ability to respond quickly to your customers.

If you have any questions, please give me a call.

Jim Dillingham, Partner

(415) 265-1621 or Jim@shift-work.com

The difference between “a schedule” and “your schedule”

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The number one way that companies find a shift schedule is to hold a meeting and ask, “So, does anyone know of any shift schedule patterns?”

There are several false assumption built into this methodology.  One is that all schedules are created equal; that any schedule that covers the hours needed is as good as any other schedule.  Another is that the workforce, having been allowed to choose between a couple of patterns will be satisfied that their needs have been considered.  Also, there is the one-size-fits-all idea which says that if one area goes to a 24/7 schedule (for example) then all other areas must follow suit.  There is the staffing assumption that you must staff to allow for ZERO overtime and that all areas of the operation must increase or decrease staffing levels in lock-step; that is to say, if a new schedule covers 40% more hours you will need 40% more employees across the board (including supervision, quality, maintenance etc.)  Finally, there is the assumption that policies for things such as holidays and vacations, which worked for your old schedule, will also work for your new schedule.

There are actually many, many more issues that are overlooked or swept under the carpet in the name of expediency, but I think you get the picture.

The right schedule is one that is implemented using the old carpenter’s adage of “Measure Twice and Cut Once.”

Taking the time to do a schedule change right will not only save you from problems down the road, but will likely result in immediate production gains and cost decreases which are not realized by the “Who knows a schedule pattern” methodology.

Here are my thoughts on just a couple of the “assumptions” mentioned above.

Employee participation is more than just allowing them to select between a couple of patterns.  Participation means they know why a change is taking place.  They are educated about what schedules can do (and can’t do).  They are given a wide variety of options that span the range of what is available instead of just a few similar patterns.  They are allowed to have meaningful input on things like overtime levels, start times, day on/off patterns and more.  They are given “perfect” information about their final options in such a way as to allow them to discuss the options with their families before making a choice.

One-size-does NOT-fit-all:  You may have an operation that absolutely needs to go to 24/7 (for example).  In some cases this means a “balanced” schedule across all days of the week where every day has the same number of people in production.  However, suppose one or more areas can keep up with the 24/7 production by only running one shift a week; should they go to the 24/7 schedule?  What about maintenance?  Should they have a “balanced” schedule or should the labor be moved to parts of the week which maximize production?  Remember, maintenance is at its peak performance when production is at its lowest.  (It’s hard to fix equipment while it is running.)  What about quality, engineering and office staff?  These areas rarely need to go to a 24/7 schedule (in their entirety) when production does.   The “Best Schedule” is usually a collection of schedules that allow all areas to operate and support each other seamlessly.

Staffing is where most companies make the most costly mistakes.  They either over-staff and thus, pay for labor they don’t need or they under-staff and run the risk of high fatigue and turnover that typically come with a worn out workforce.  Staffing is not guesswork.  There are mathematical solutions that will tell you what the optimal staffing level is for your site.

As for policies, let me just say this: “If you think your 5-day policies will all work just fine on a 24/7 schedule – you are wrong.”

If you decide to “go it alone” let me at least offer you this: Give me a call when you get stuck.  So long as I don’t have to pick up a pencil, I’m free.  So don’t make a mistake because you didn’t have someone to go to.  My name is Jim Dillingham and I can be reached at (415) 265-1621.  You can also email me at Jim@shift-work.com.

 

Overtime: A Grab-Bag of Information

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I am an overtime expert.  I have worked with companies around the world for more than 25 years helping them address staffing and scheduling issues, most of which have some level of overtime as a component of the overall situation.

My last blog post was about overtime and it generated a lot of discussion; especially on Linkedin.  At a glance, one might think that everyone was stating their opinion about an issue and thus, might be disagreeing with someone else who had a different opinion.  In truth, I think nearly everyone was right.   They all just had different perspectives.  I thought I would try to put all of these issues into a single blog along with my own perspective.  Wish me luck…

  1. An hour of straight time (fully loaded) costs a company about the same as an hour of overtime paid at the rate of time and one-half.
  2. About 20% of people love overtime.  About 20% of people hate overtime.  About 60% of people will work their “fair share”.
  3. When it comes to overtime, the “marginal propensity to save” is always less than one (1).  What this means is that people don’t same 100% of their overtime income.  This also means that they up their standard of living when they spend overtime income (even if this means they only bought an extra candy bar).
  4. As people adjust their standard of living, they become “addicted” to the overtime.
  5. Consistent high levels of overtime extending beyond 6 months in a row will result in “Golden Handcuffs.”  This is a phenomena where people will complain about too much overtime ruining their family lives AND complain if overtime hours are cut because they can no longer afford to make a car or house payment.
  6. Overtime at union sites is a particularly tough problem.  Senior employees get the prime overtime during the week and the junior employees end up working the undesirable weekend overtime  The result is high turnover of new employees who tire from never having a day off.   I typically recommend that senior people get first shot at overtime up to a certain level (56-60 hours in a week) before they go to the bottom of the volunteer list.  I also typically recommend that junior employees are the first to be forced to work overtime up to a certain level (56 -60 hours in a week) before they go to the bottom of the forced list.  This recognizes seniority while keeping people from “voluntarily” working themselves to death while, at the same time, giving the junior people time off to recuperate every week.
  7. If you workload is flat (does not change by week, or month or season) then a good target for overtime is between 5% and 15%.
  8. If your workload is highly variable, the optimal level of overtime (considering both cost and fatigue) may be much higher than 15%.
  9. Too much overtime is less of a problem than too many days of work in a row.  We short ourselves sleep on days we work.  The more days in a row we work, the farther we fall behind in our sleep.  We need days off to catch up on our sleep.  In other words, its better to work four 12-hour shifts in a week than to work six 8-hour shifts.  Both have 48 hours but the 12’s have 3 times as many days off for recovery.
  10. If a machine paces the work, then moderate levels of overtime will not have an impact on productivity.
  11. If people determine the pace of work, more overtime will cause the people to slow down, even if it is unintentional.
  12. Overtime at high levels will cause drops in productivity, safety, quality and retention.
  13. When assigning overtime, do so as far in advance as possible to minimize the disruption to the plans your workforce may make outside of the work environment.
  14. If your overtime level is zero, you are not “perfectly” staffed.  You are over-staffed.
  15. The accident rate per hour should be expected to go up between the 12th and the 14th hour worked in a day.
  16. Overtime does not make people sleepy.  Lack of sleep makes people sleepy.  Circadian rhythms also play a role in alertness.
  17. Overtime allows a company to compete for labor with other companies that may pay higher hourly rates but offer very low overtime amounts.
  18. When people work outside of their normal schedule, pay them a premium.  They are helping you on time that was originally considered to be their own.
  19. Straight time is typically purchased in 40 hour/week increments when you hire someone.
  20. Overtime hours can be purchased in any quantity you wish.  Even though it costs the same as straight time, you are actually getting a fully qualified person as opposed to hiring and training someone to provide more hours.
  21. All employees want overtime when they want it and they don’t want  it when they don’t want it.  Go figure.

I welcome your questions and feedback.  If you disagree with me, first ask yourself, “Is my perspective different from the one Jim was using when he wrote these?”  I say this because I can easily find unique situations where each of the above is not true.

I can be reached at Jim@shift-work.com or by telephone at (415) 265-1621

 

 

 

 

 

 

 

Overtime: Fact V. Fiction

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It is not unusual for a company to contact us with the following idea: “If I can just put in the right schedule, I will save a ton of money on overtime.”

There is really just one condition where this is absolutely true.  If your current schedule has too many people at one part of the week and not enough people at another part of the week, the right schedule will correctly redistribute these people and you will save a ton of money.

Then there are times when this is partially true.  If your operation is expanding and the size of your workforce is fixed, then overtime will go up.  When overtime goes up the following happens: (1) The workforce makes more money, (2) The workforce becomes fatigued, (3) Productivity per person will drop, (4) The accident rate per hour will go up, (5) Quality will decrease and absenteeism and turnover will increase.

The perfect schedule will allow you to keep these from happening.  It does this by allowing you to add straight time hours to “replace” overtime hours.

Note the use of the term “replace.”

In most cases, reducing overtime means adding straight time.  From a cost perspective, the two are nearly identical.  Straight time costs include wages AND benefits as well as taxes.  Overtime costs include a premium rate and taxes.  In the end, they typically cost the company the same.  What this means is if you say, “We can eliminate $1 million a quarter in overtime costs with a better schedule!”  It is very likely that your next sentence should be “However, we will also spend $1 million a quarter in additional straight time costs.”

This is not to say you should not keep a handle on your overtime.  Too much will certainly cost you; often in disastrous ways (as noted above).  However, overtime should not be seen as the “low hanging” fruit on the road to reduced costs.

If you want to reduce your costs – increase your volume.

There is no simpler way to do it.

By the way, most companies, with level production levels find that an overtime rate between 5% and 15% is just about right.  Keep in mind, in a typical workforce, 20% of your workforce avoids all overtime.  20% of your workforce loves all the overtime they can get.  The remaining 60% will work what they feel is a fair amount.

If you want to know how your workforce feels about overtime…

Ask them.  Don’t guess.

 

 

 

 

6-day schedules (part 3)

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This is the third in a series about 6-day schedules.  I recommend you read 6-day schedules (part 1) and 6-day scheduled (part 2) before going forward with this one.

Today’s post will begin the focus on a 12-hour schedule pattern for covering 24 hours a day, six days a week.

The premise behind this schedule is that you still only want to use three crews to cover six days, but you would rather not hire more employees.  Because of this, everyone will still have to work 48 hours a week (changing schedules does not change total hours worked.  Only changing staffing or the workload does that).  This schedule allows people to get their weekly 48 hours in by only coming to work for four days a week.

Lets look at a quick comparison:

8-hour shifts: Work 6 days @ 8 hours and get one day off per week.  Total hours worked – 48

12-hour shifts: Work 4 days @ 12 hours and get three days off per week.  Total hours worked – 48

Picture2

This pattern can be worked as either a fixed schedule, a rotating schedule or and oscillating schedule.  The way it is shown here is as an oscillating schedule.  This is a schedule that has both “fixed” and “rotating” features.  In this example, the crews labeled “Days” and “Nights” are working fixed shifts.  That means they are always on Days or Nights.  The crew labeled “Day-Night” actually rotates between Day shift and Night shift (Nights on Mondays and Tuesday and then Days on Fridays and Saturdays).

There are several benefits to this schedule over a traditional 6-day, 8-hour pattern.

Employees will like it for a variety of reasons.  All will appreciate the extra days off.  The Day shift people will like having every weekend off as a 3-day weekend.  The Night shift people will like having 3 days off in a row, even though they are Sunday through Tuesday.  The rotating crew will typically be the junior-most crew.  As the junior employees, they could be looking at years before they have enough seniority to get to the Day shift.  In this schedule, they work Night shift for 2 days and then do not have to return to nights for another five days.

On the downside, the nature of the work must always be considered when looking at 12-hour shifts.  In nearly all cases, if someone can do something for 8 hours at a time for 6 days in a row with a single day of rest in between, then they can do that same thing for 12 hours at a time for 4 days a week with three days off per week to rest.

Most companies that go to 12-hour shifts will find that they need to rework some of their pay policies.  For example, if you only pay up to 8 hours a day when someone goes on jury duty, you may want to rethink that policy.

In 6-day schedules (part 4) I will return to the 8-hour idea.  We will look at a way to add people in a less-than-full-crew increment to reduce overtime.

If you have any questions, you can email me at Jim@shift-work.com or call me at (415) 265-1621.

10-hour shifts – Part Four

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This post is the fourth and final post in a series about 10-hour shifts.  If you have not already seen the first three posts in this series, I recommend you do so before viewing this post.

This is a link to 10-hour shifts – Part One.

This is a link to 10-hour shifts – Part Two.

This is a link to 10-hour shifts – Part Three.

 

Click on the schedule (below) to see 10-hour shifts – Part Four.

Capture 10's