When is high overtime appropriate?

We are typically asked about ways to lower overtime. It is clear that most companies view overtime as a necessary evil. They try to get it as low as possible and consider all overtime reduction as cost savings.

In many instances, they are right. However, just as often, they are wrong.

From a pure tangible cost perspective, overtime probably is about 10% more expensive than straight time.  This means you can reduce overtime costs by adding more people (more straight time hours).  However, suppose you try to do this but overshoot the mark.  You hire so many more straight time hours that you now have more than you need.  You are overstaffed.

Being overstaffed is about fifteen to twenty times more expensive than being understaffed.  If you are understaffed you pay for overtime instead of straight time.  This probably comes to an extra couple of dollars an hour.  If you are overstaffed, you are paying full wages and benefits to hours you don’t need.  Depending on your hourly rate, this could be anywhere from $20 per hour to well over $40 per hour.

So back to the topic at hand.  When is high overtime appropriate.

The short answer is – when your workload is highly variable.

A longer answer would be – when your workload is highly variable and the skill set you require of your workforce is not readily available using any of the traditional workforce arguments (i.e. part-time and temporary labor).

If you staff to match peak workloads and your workload is variable, then you will find yourself overstaffed quite often.

If you staff to match you lower workloads, you will find yourself understaffed.  This means overtime.

The greater the variability, the more idle time you will incur if you staff to peak production and the more overtime you will incur if you staff to minimum production.  Since overtime is significantly less costly, you will pay less if your staffing tends towards the minimum production.

There are ways to schedule your workforce to closely match a variable workload.  The more predictably variable it is, the better the match becomes.

Call or text us today at (415) 858-8585.

Considerations for Multiple Schedules

Often, when we start on a project with a company, the question will be asked, “Can we put in more than one schedule?” The intent is to discern if such a thing is actually possible or too complicated to consider.

The answer is almost always, “Yes, in fact, you already have multiple schedules being worked at this site.”

It would be a rare find indeed if a company was operating with its entire workforce on a single schedule. It would be even rarer if such a singular scheduling scenario was optimal from an efficiency perspective.

Consider your basic operation where there is a maintenance crew and a production crew. Quite often, these two disparate operations are on the same schedule in spite of the fact that one cannot do its job while the other is working. You can’t run a line that is taken apart for maintenance and you can fix a conveyor belt that is moving.

So different schedules are not only possible but often necessary for the efficient operation of the facility.

Suppose that you have two different schedules but they are both in maintenance or both in production. Is that feasible?

Certainly. If you have, for example, three identical production lines and you can only meet production demands if one of the lines is running 24/7, then it makes sense to have one line run 24/7 while the others remain on a 5-day schedule.

While this is efficient, it can lead to complications when it comes to issues like overtime, absentee coverage, and seniority. For example, if a 12-hour, 7-day schedule and an 8-hour, 5-day schedule both start at the same time and there is an absence on the 12-hour schedule, what do you do? Do you cover it by calling in a 12-hour person on their day off? Do you hold over an 8-hour person that is expecting to go home? If both options are available, who chooses which option will be used? Suppose there is a 12-hour person at home that wants to come in for the overtime but there is a more senior 8-hour person that wants to hold over; does seniority rule or does the person on the schedule get priority?

Suppose a person on a 12-hour schedule wants to take 2 weeks of vacation and an 8-hour person steps into the 12-hour schedule to fill the position, are there any policies that will be impacted? This seems like a simple issue until you understand that often pay and work policies for an 8-hour schedule do not work well for a 12-hour schedule.

The list of considerations goes on and on. Suppose there is a layoff on one product line on one schedule but not on another product line on a different schedule? If you lay off by seniority and a senior person stays but has to change lines and schedules and then wants to take a vacation, will your policies work?

If you have one supervisor covering two lines and the lines are on different schedules, what schedule will the supervisor work? The more time he spends one schedule with one crew, the less time he will spend with the crew on the different schedule.

Finally, different schedules have different levels of attraction. Are you willing to allow skilled employees to migrate to a more attractive schedule?

Multiple schedules not only work, but they are also often more beneficial to the company. However, be prepared for the complications that can arise from such a shift work structure.

Call or text us today at (415) 858-8585.

A schedule is more than a day-on-day-off pattern

Most people that come to our site are thinking “I need a shift schedule so all I need to do is search the internet until I find a pattern that I like.”

There are several “Danger Will Robinson” issues associated with this idea. First of all, what you like may not be what everyone else likes. Secondly, what everyone else likes may not be what is best for your company.

Suppose you like to work the Day Shift and have all of your weekends off. It won’t be hard to find a schedule that provides this type of pattern. Now, suppose you work at a refinery that runs 24/7. If you have all day shifts, then others are having to work more non-day shifts. If you have all of your weekends off, then others will have to work the weekends more often. So you can see, satisfying your personal preference may not satisfy the preference of others.

Take this same refinery. Suppose everyone agrees that weekends off would be a good thing. You will have no problem finding a schedule that gives all of the weekends off and you will certainly have no problem getting a consensus that such a schedule is a good idea from a lifestyle point of view. However, a refinery must run on the weekends. Having a schedule that gives everyone the weekends off will not change that fact.

Here are a few ways that schedules differ:
amount of coverage
amount of overtime
scheduling maintenance
scheduling vacations
absentee coverage
product flow
health and alertness
shift length
number of days in a row
fixed or rotating shifts
fixed or rotating days
cross-training
sanitizing schedule
shipping schedule
warehouse capacity and scheduling
seasonality
discretionary work
overtime pay and policies

This list can go on and on. Different companies, even within the same industry often need different schedules.

Take the time to do the research and find out what you should be thinking about your situation. We are here to help. Send us a message to discuss your situation with one of our shift work experts. There is no charge for the call so if you have a question, there is no reason not to ask for help.

Call or text us today at (415) 858-8585

Non-wage Solutions to Rising Wage Pressure

We all knew this was coming. We watched and cheered as unemployment numbers dropped, month after month. This meant the economy was recovering. Manufacturing, in many industries, has reached the tipping point and is returning to the United States at a pace not seen in decades.

One of the results of this “bountifulness” is a lack of skilled labor. In some cases, it’s a lack of labor at even the most basic levels.

Part of this is a training issue. We have modernized our production methods without a training mentality to keep pace with the new skills we need.

Part of this is just “not enough bodies.”

The result is a scarcity of labor which drives up the cost of labor as we compete for this ever dwindling resource.

The most obvious way to deal with this; to bring in the labor with the skills you need; is to raise wages. Raise that wage bar high enough and labor no longer becomes a problem. However, you have now changed your cost structure and thus your profitability. In some industries, labor costs are a small component of the Cost of Goods Manufactured and increased wages have relatively little impact. In other areas, labor costs eat away at a small profit margin and your very survivability depends on your keeping these costs low.

So, what can you do if you don’t want to, or don’t have the ability to raise wages?

The answer is to use your schedule as part of the attraction. Make it one of the reasons people want to work for you and not the company across the street.

Here are just a few ways to do this:

  1. Maximize days off. The overwhelming preference of our labor force is to work longer days to get more days off. As an example, let’s assume an employee works 40 hours a week or 2,080 hours a year. If they work 8-hour days, they will have to work 260 days a year. If they work 10-hour days, they will have to work 208 days a year. If they work 12-hour days they will have to work 173.3 days per year.
  2. Make your work schedule one that fits the needs of your employees. Don’t assume you know what your workforce wants. Ask them. Ask them in such a way as to allow everyone to participate. This means creating setting where the “loud cannot intimidate the meek.”
  3. Make your work schedule predictable. This means creating a system where your employees know when they can work and when they can plan on not being at work.
  4. Look at flex-time or work-from-home ideas.  There is little doubt that employees find these types of ideas attractive.
  5. Use overtime as a benefit. This means finding out how much overtime your workforce wants as well as who wants it and who does not. You want to be able to get overtime to those that like it while not forcing it on those that don’t. This will improve predictability as well as help you to compete wage-wise. A company across the street may pay $15 an hour while you only pay $14. However, if you offer a lot of overtime, your overtime employees will recognize that they can make a lot more money working for you. Along with making overtime available, try to absolutely minimize the amount of times overtime is “mandated” or assigned on short/no notice.
  6. Create a participative work environment. No one likes to be told what to do. When I go to a site and find the workforce somewhat disgruntled, it is nearly always a communication issue. More specifically, it’s a feeling of “I don’t matter” or “No one is listening to me.” Keep in mind, people come to work for the money but stay for other things such as job recognition, the ability to advance and a feeling of accomplishment.
  7. Make you actions and policies transparent and apply them fairly. All too often, I come across employees who misunderstand a policy or feel they are being singled out. When this happens, it is important to listen and investigate. They might be right. Or, they might be wrong but are just seeing things incorrectly. Feelings of “not fair” are precursors to an employee leaving for greener, more just, pastures.

Of course, these are just generalities. Some are easier to implement than others and many may not even be applicable to your situation. However, we are on the crest of a large surge in Wage Pressures. It’s best to stay ahead of the game rather than coming to work one day and having to ask “Where did everyone go?”

Jim Dillingham

Shiftwork Solutions, LLC

(415) 265-1621

Jim@shift-work.com

 

Overtime: The Good, the Bad and the Ugly

Overtime is a topic that I could write a book about and still only hit the highlights. My intention is to, from time to time, post something about overtime. In this way, we can cover it in small, manageable chunks.

Let’s make it simple to start with.

The Good: Overtime represents a set of trained labor hours that can be used in increments needed to exactly match the job at hand. Cost-wise, overtime probably costs about 10% more than a fully loaded straight time hour. However, since it tends to be more productive, the cost per hour can actually be significantly lower.

The Bad: If there is too much overtime, the workforce will complain about not having any time off. If you try to reduce overtime<, they will complain about lack of income opportunities.

The Ugly: High overtime can increase fatigue, turnover, absenteeism and safety incidences.

Call or text us today at (415) 858-8585.