Viewpoint: Eliminating overtime in 24/7 operations is a poor choice
By Bruce Oliver
As cities and counties struggle to make ends meet, overtime often becomes a target in their budget reduction plans. Although cutting overtime may be financially prudent for most departments, it is a poor choice for those that operate around-the-clock. Here’s why.
The simplest and most common way to provide 24/7 coverage is with four crews. If the crewswork 40 hours a week, that provides 160 hours of coverage (4 crews X 40 hours = 160 hours). The problem is that there are 168 hours in a week (24 hours X 7 days = 168 hours).
The easiest way to close the eight-hour gap is to have the four crews work a small amount of overtime (an average of two hours per employee every week). With eight-hour shift schedules, that requires three hours extra pay for each employee, or a 7.5 percent increase. With 12-hour shift schedules, that requires four hours of additional pay for each employee, or a 10 percent increase.
If an organization is prohibited from using overtime, it must choose one of the following approaches to avoid gaps in coverage:
- Use part-time employees. Some smaller organizations can do this, though it can be a challenge to find and retain good part-time employees. With larger groups, it can be difficult to fit part-time employees into the schedule without having one shift staffed solely with part-timers. This approach will increase costs by 5 percent. Although slightly less expensive than using overtime, it has limited applicability.
- Use more than four crews. A schedule that uses more than four crews requires a larger headcount. If an organization does this, they usually allocate some of the extra work hours to training, relief, maintenance or special projects. Even if you ignore the cost of benefits for the additional employees (usually anywhere from 40 percent to 50 percent of the wages), this approach will increase costs by at least 25 percent.
- Use a crewless schedule.Instead of scheduling groups of personnel (i.e. crews), you could develop a schedule for each individual employee. This approach will require more employees than a typical four-crew schedule. The number depends on: (a) the shift length, (b) whether the shifts are rotating or fixed, and (c) the number of job categories/positions involved. This can increase costs anywhere from 7.7 percent to 50 percent if you ignore the cost of benefits. In most cases, this approach will cost more than using a four-crew schedule with built-in overtime.
Although overtime is often perceived as something to be avoided (because it requires a time-and-a-half pay premium), it is not the most expensive approach for providing 24/7 coverage. Using part-time employees to supplement four crews is the least expensive solution, but this is only feasible in smaller groups. So, before banning overtime, it is important to recognize that the policy will force groups that operate around-the-clock to adopt schedules that are actually more expensive.
Bruce Oliver has been involved in the design of shift schedules for the past 10 years. He runs his own business, Novato, California-based Shift Schedule Design and can be contacted at bruce@shift-schedule-design.