How Adjusting the Start of the Pay Week Can Reduce Built-In Overtime
Many of our clients are looking for ways to cut expenses in their 24/7 operations without having to reduce the number of employees in their workforce. For operations working a typical 4-crew 12 hour shift, one simple way to reduce built in overtime is by changing the beginning of the pay week.
For many operations, it is common to have the beginning of the pay week coincide with the start of a particular shift. For example, if the regular shift start times are 7 a.m. to 7 p.m. for the day shift and 7 p.m. to 7 a.m. for the night shift, most operations will start their payweek on a Sunday or Monday at 7:00 a.m. This results in half of the weeks in the year consisting of 48 hour work weeks and half made up of 36 hour work weeks. The 36 hour weeks are all at straight time (unless policies or agreements provide for premium pay for all or part of the hours). However, the 48 hour work weeks translate into 40 hours of straight time and a minimum of 8 hours of overtime paid at least at time and one half. When averaged over the course of a year, this results in an average pay of 44 hours for each shiftworker.
If the schedule being utilized has alternating 36 and 48 hour weeks, a change in the pay week start time can “push” 4 of the overtime hours from the 48 hour week into the 36 hour week. This then creates a week of 40 hours of work at straight pay and 44 hours of work the next week. In rotating shifts, this concept can save 1/2 hour of straight time pay per employee per week, for an average of 43.5 hours of pay. On a fixed shift system having optimized start times for the Day and the Night shift, straight time pay can be reduced by 1 full hour per week for an average of 43 hours of pay. In both schedule types, the number of hours of production and shift coverage remains at 100% but the distribution of the built in overtime is reduced. This small change alone can save thousands of dollars each week which can mean the difference between laying off employees and keeping the workforce in tact.
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