Absence wreaks havoc on overtime costs – but is hiring more workers the answer?

With all of the advanced labor management systems on the market, it amazes me how overtime costs remain out of control in many industries, but clearly there is a major problem in the public sector…

Just this month, the San Francisco Municipal Transportation Agency is reported to exceed its overtime budget by $18 million this year. The agency officials claim that employee absence is the direct cause of overtime costs.

Muni needs 1,491 operators to provide the scheduled service and on any given day is down about 300 operators, he said. That leaves management with the choice of missing runs – and angering riders – or using operators on OT at time-and-a-half pay to cover the shifts.

300 operators a day!? Can you imagine if 20% of your workforce was absent every day?

Similarly, in 2008 the Tampa Bay Business Journal reported that Hillsborough Area Regional Transit officials cited abuses of family medical leave impacted its budget, when nearly half of their 364 bus drivers asked to take sporadic medical or family leave. The claims ended up costing the agency millions of dollars in overtime.  Managing absence has a clear and costly impact on overtime.

Fortunately the actual amount of overtime per operator is regulated based on DOT restrictions on hours worked, to ensure safety. But while drivers and pilots are limited in the numbers of hours they can work in a week, what about public safety?

Earlier this week, it was also reported that police in Jersey City, NJ earned $6.6 million in overtime pay.

With state and local government budgets continuing to be cut and scrutinized, what is the solution? In the past, overtime costs would justify hiring. Hire more people to reduce the overtime costs. Today, that’s not always the answer.

“It’s more “cost effective” to pay a handful of officers overtime at “sporadic” points throughout the year than to hire new officers who would require health benefits and pensions” – Jersey City Police Chief Tom Comey

“Jon Shane, a former Newark police captain who now teaches in the Department of Law and Police Science at the John Jay College of Criminal Justice, said Comey is absolutely correct: paying overtime is cheaper than hiring new officers.”

While focused on the manufacturing industry John Frehse, Chief Strategy Officer at Core Practice supports this point in his paper “The Overtime Lie”, stating that strategic use of overtime can be much more cost effective than hiring additional personnel.

Bottom line – there are many labor management strategies that can offset the cost of overtime. Absence management and optimized scheduling are just a few. Once these issues are addressed, more strategic use of overtime practices can be employed.

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