Human Resources Budgeting and Employee Productivity Chapter 16 Human Resources Budgeting and Employee Productivity

Learning Objectives Discuss the purpose and components of the labor budget Translate the labor budget into human resources requirements Determine staffing levels based on productivity standards Indentify staffing requirements based on patient acuity levels Analyze employee productivity based on benchmarking List the challenges in managing the labor budget Compare and Contrast the benefits and barriers to outsourcing services Explain the impact of mergers and other organizational changes on managing human resources

Linking Budgeting with Resources Management If an organization employs the number of staff, benefits, raises and incentive program that the managers want – they will not be able to afford anything else!! Planning HR activities without consulting with the budget is negligent

The Labor Budget Consists of expenses for: Salary Wages Benefits Other employee costs Purpose of the labor budget is to predict the following: Required staffing levels based on volume projections and productivity Projected expenses related to regular, overtime and overall productive hours

The Labor Budget Purpose of the labor budget is to predict the following: (cont.) Nonproductive hours expenses related to paid time off, including vacation, sick, holiday, personal, and education and other training hours Expenses for benefits, including payroll taxes, insurance and other benefits provided to employees Total salary, wage and benefit costs HC Organizations should develop flexible budgets

Labor Budget Terminology Salaried employees Wage earners (nonexempt) Acuity level Down time Full-time equivalent (FTE) Labor budget Nonproductive hours Productive hours Salaried employees A person who is exempt from overtime and is paid a fixed amount Wage earners (nonexempt) This person is nonexempt receives payment based on hours worked Acuity level The level of care giving difficulty that determines staffing needs Down time Hours spent during work that is important to the job but do not generate revenue Full-time equivalent (FTE) The equivalent of one full time worker working 40 hours. This may actually be made up of more then one person Labor budget Includes all expenses associated with salary, wages and benefits. Nonproductive hours Hours paid but not worked (IE: paid vacation) Productive hours These are hours actually works (including down time)

Components of the Expense Side of the Labor Budget Includes but is not limited to : Regular hours Overtime Hours Total Productive Hours Holiday Hours Off-site education Total FTEs Payroll Taxes Benefits

Linking Human Resources Budgeting to Employee Productivity Unclear work policies and procedures Lack of productivity standards, or lack of monitoring Inefficient use of time Poor work layout Poor training Poor system Unclear work policies and procedures Work place rules are not adhered to or are too vague Lack of productivity standards, or lack of monitoring Often the productivity standard is not shared with employees Inefficient use of time Many employees do not see productive time equated to revenue Poor work layout The facility layout may cause inefficiencies Poor training This may cause employee to work slower Poor system Systems are not evaluated to see if there is a better way to do them

Linking Human Resources Budgeting to Employee Productivity Cross training is a good method to manage productivity Managers should compare productivity to industry benchmarks as well as other internal units

Acuity Levels’ Impact on Staffing Needs Resource Utilization Group Classification System (RUGS) Staffing levels should fluctuate depending upon patient needs. Technology can be used to assist with staffing levels. Resource Utilization Group Classification System (RUGS) This is a systems that quantifies patient service units for long term care. Reimbursement is based on these calculations. Staffing levels should fluctuate depending upon patient needs. Staffing levels should take into consideration the difficulty of caring for the patient. Nursing levels for and ICU should not be the same as the Outpatient clinic. Technology can be used to assist with staffing levels. Computer systems are available to assist manager is calculating the acuity level of a Unit.

Other HR Practices Related to the Labor Budget Nonstandard staffing Outsourcing Nonstandard staffing Pro – Provides inexpensive solutions to staffing issues in the short term Con – is very expensive if not used properly Outsourcing Pro – Accessing expertise, better technology, control costs Cons – Lose the day to day supervision of the activities

Using Labor Budget Metrics for Measurement Performance should be measured against internal and external benchmarks. These include: Cost per employee hired, time to fill jobs, benefits claim response time, training hours produced. A variance in the actual v. budgeted amount of 5% or more in either direction should warrant a discussion as to the cause of the variation.

Mergers, Acquisitions and Strategic Alliancnes Competition is forcing organizations to work together to gain expertise. This trend can be seen with the utilization of hospitalists. This has helped hospitals become more efficient when delivering inpatient care.