6-day schedules (part 3)

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.

Let’s 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 the 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.

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

Overtime: Fact V. Fiction

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. Or…

 Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

The Cost of Time

Suppose I asked you the following question:  “Will an employee make more or less money when they work overtime?”

You might quickly answer: “Yes.  They make anywhere from 50% to 100% more when they are being paid at the overtime rate.”

And you would be right.

Now, suppose I asked you, “Which costs you, the company, more to pay: overtime or straight time?”

This question is much more complicated and has a surprising answer.

When you take into account the cost of straight time, you must consider the additional cost of medical plans, retirement, vacations, holidays, etc.  While overtime and straight time both have payroll taxes, only straight time is burdened with all of these other costs.

The fact is that the cost to your company for an hour of straight time or overtime is probably about the same.  My experience is that they are nearly always within 5-10% of each other; sometimes straight time is more and sometimes overtime is more.

The math says that the higher your hourly rate is, the more likely it is that overtime will be more expensive.  Conversely, the lower your hourly rate, the more likely it is that straight time is more expensive.

This is a rather fortuitous result.  When your wages are low, you can use overtime to enable your employees to enhance their income.  In doing so, you may actually be lowering your hourly labor cost.

If you have any questions regarding this or any other shiftwork issue, please give me a call.

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

Is Overtime Really a Problem?

I recently participated in an online forum about the “Evils of Overtime.”  I was surprised at how uniformly overtime is seen as something to be avoided.  Its as if overtime was a measurement of how poorly you were managing your workforce.  Here was one of my comments:

Overtime is only a problem if you see it as such. It’s not unusual for a company to contact me with an “overtime” problem. They look at their costs and see, for example, a million dollars spent on overtime last quarter. They think they will save this amount if they eliminate overtime. The fact is that, unless they are improperly staffed, they will only reduce overtime by increasing the straight time (hiring). After all, the work supposedly needs to be done and eliminating overtime means its either not getting done or you found another way to do it.

The cost of an hour of overtime is typically competitive with the cost of straight time. I’m working at a company right now and the precise cost of paying someone $15.47 an hour is $25.25. At the same time, the cost of paying someone that same hourly rate at time-and-one-half is…$25.35 an hour. 10 cents more!

Overtime allows you to compete for labor even though you cannot afford a high hourly rate. People can make more money and supplement their income in spite of low wages. I can work at company A for $20 an hour but no overtime or I can work at company B for $17 an hour but can work all the overtime I want.

Overtime is flexible. You don’t have to buy it in 40-hour/week increments. The person is already trained and hired.

On the downside, there are fatigue/safety issues, although these can be managed if you are paying attention. There is also to the potential of too much overtime – translated into “not everyone likes a lot of overtime but everyone is getting a lot of overtime.”

This last issue can be fixed if you remember that overtime is a function of how much work there is and how many people you have to share in that work. Variations in workload aside; you should staff to the point that there are typically reasonable amounts of overtime for those that want it and very little mandatory overtime for those that don’t.

Two rules of thumb: (1) 20% of your workforce wants a lot of overtime; 20% wants no overtime and 60% will take it from time to time and (2) If your workload is flat, you should be in the 5% to 15% overtime rate. Note: Companies often boast that they are perfectly staffed because they have no overtime. They couldn’t be more wrong. Zero overtime almost certainly means you are overstaffed.

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

Staffing? – Good Question

Considerations for answering – How Many Do I Hire?

I’m a shiftwork expert so my posts are always centered on shiftwork operations.  That doesn’t mean that there isn’t something that a non-shiftwork operation might find helpful.  My hope is that every reader of every post is able to find value.

Most of my work, about 70%, is with companies that want to expand their operations while minimizing capital investment.  Basically, I help answer the question “How can I get more out of the equipment I already have?”

Once that’s been determined, my bread and butter is “process and implementation”.  I help them find where they want to go.  I valuate that destination and then I help them to get there.

One question is always “How many people do I have to add to get to where we want to go?”

There are short and long answers to this question.

If you are running three shifts, Monday – Friday and want to go to a 24/7 operation, you need to add 33% more operators.  You will also need to add another supervisor.

That was the short answer.

Here is the longer one…

This is really more of a list of considerations rather than The Long Answer.

First, we have to land on an overtime number.  This is more than just creating an arbitrary goal of so many days or hours of work in a row.  Try answering the following questions for a start:

  • How much overtime do you want to have?
  • What does overtime cost (the cost to the company not income to earner) as opposed to fully loaded straight time?
  • What is the workforce’s appetite for overtime?
  • Is the process seasonal in that sometimes you need more people than at other times? What is the level of operator specialization?
  • What is your turnover?
  • What is the lead time between needing a new hire to having a fully trained person?

The overtime issue is a big one since, with a fixed workload, overtime is a function of staffing.  More people = lower overtime.

If production is going to run more days, what does this imply for support operations?  Will quality, maintenance, and sanitation requirements be expanded? Often the answers are something like this:

  • Quality will be affected slightly.  They will need more people but not 33% more.  Maybe something like 10% more.
  • Maintenance will actually become more efficient as you no longer have to be staffed at a level where you can fix everything on a weekend.  When running 24/7, maintenance is often spread out on the more productive weekday shifts.  This may actually lower your maintenance staffing.
  • Sanitation crews sometimes drop to zero staffing.  This is because 24/7 operations no longer sanitize in accordance with a fixed day or time of day schedule.  Instead, they run for as long as they can and then the operators simply become sanitors and clean up their own lines; starting back up as quickly as possible.

​You don’t need 33% more Plant Managers, HR Managers or Engineers.  There is definitely a “cheaper by the dozen” affect when it comes to many of the higher level non-direct labor positions.

Clearly, if production goes to a 24/7 pattern, not everyone at the plant needs to do so as well.  In fact, there is a good chance, depending on your operation, that not all of the production needs to go.  It’s not unusual for some lines to go to 24/7 while others remain on a 5-day schedule.  In some instances, running your high volume equipment more hours will actually take fewer people instead of more if you are able to retire some of you older, more labor-intensive capital.

So there you have it….the longer answer.

The point here is that you need to do your homework.  Look at the fully loaded cost of a single employee.  Hire too many and things start to get expensive in a hurry.  My rule of thumb is to initially staff lean when in doubt.  If you are wrong, you can use overtime until you get the staffing right.  Coming in with too many people to start with will cause “income shock” to those that just lost all of their overtime AND you run the risk of overstaffing which is expensive and only fixable by painful layoffs.
 

Call Us and We Can Help

Call or text us today at (415) 858-8585 to discuss your operations and how we can help you solve your shift work problems. You can also complete our contact form and we will call you.

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.

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.