1 MANAGING OVERTIME TO CONTROL COSTS AND IMPROVE SERVICES

2 As budgetary pressures on school districts increase, many managers are placing an increased emphasis on reducing overtime expenditures The common thinking among many decision-makers is that overtime costs are a discretionary expense that can be eliminated without adversely affecting services In the absence of an extraordinary event (such as a flood, tornado, blackout or earthquake), this thinking runs, overtime is an unnecessary expenditure that can be largely dispensed with if management attention is properly focused on the issue Certainly, it is true that through aggressive management overtime costs can be dramatically reduced It is not necessarily true, however, that reductions in overtime expenditures can be achieved without affecting service quality Indeed, in a well managed school district judicious use of overtime is a necessary part of doing business that, if appropriately managed, can be used to both improve services and reduce costs Introduction

3 The key to managing overtime effectively is to clearly identify the legitimate ways that overtime can be used In general, overtime use in school districts can be divided into three categories:  Overtime that is required based on employment agreements  Overtime that is required to provide needed training  Overtime that is used to provide additional staff capacity on an “as needed” basis Depending on the needs that overtime is being used to address efforts to reduce overtime may result in savings or, alternatively, compromise services and, in some cases, increase costs Introduction

4 When used to strategically reduce full-time staffing needs overtime can be an effective tool for controlling costs Contrary to common perceptions, paying workers overtime is not always more expensive than hiring additional full-time workers to perform a given job  When benefits costs are considered, hiring additional full-time workers to perform an activity or paying existing workers “time and a half” overtime to perform the activity is often close to a “wash”  While other factors must be considered when determining whether overtime should be used to perform a function, cost is often not the determining factor  For example, if too few full-time workers are employed the stress created by requiring workers to work overtime on a consistent basis can prove debilitating  Likewise, concerns about how many hours in a day a worker can function safely and productively must also be considered when determining whether overtime is an appropriate management tool Introduction

5 Overtime required to comply with labor agreements must be accepted as a cost of doing business Labor agreements typically include stipulations specifying the circumstances under which overtime must be paid and the amount that must be paid  For example, a labor agreement may require that custodians who clean a school following an after-school event receive overtime pay for the hours they work in addition to their core shift While it is important to understand these costs when negotiating labor agreement, once the agreement is in place there is little that managers can do to manage these costs  They must be accepted as a cost of doing business Introduction

6 Overtime used to support training can typically only be reduced by curtailing training activities Training related overtime is typically used to either compensate employees who receive training or to compensate replacements for employees who are away from their normal duty assignments receiving training The only way to reduce these overtime expenditures is to curtail training or to defer the work that would otherwise be performed by the employees who are being trained As a general rule, however, the level of training staff receive should be determined by operational needs not by the availability of overtime resources  Likewise, deferring work compromises the level of serviced provided and, in the case of maintenance activities, can increase costs in the long-run Introduction

7 Overtime that is used to provide additional capacity on an “as needed’ basis can be controlled by effective management and supervision Overtime is also used to provide additional staff capacity on an “as needed” basis for a variety of reasons:  To complete an assignment at the end of a shift  To perform a special function that normally does not need to be performed  To support a special event  To perform activities for which seasonal or cyclical increases in workload are experienced Overtime to provide this type of “as needed” capacity can be controlled through careful management and supervision It is this type of overtime on which managers should focus the bulk of their efforts to control overtime expenditures Introduction

8 The key to managing overtime costs therefore is to carefully distinguish the uses for which overtime is used Efforts to control overtime where overtime is mandated by labor agreements or is used to support needed training are unlikely to be effective and can be counter productive On the other hand, total compensation costs can be reduced by strategically using overtime to reduce full-time staffing requirements In addition, by carefully monitoring and managing the discretionary use of overtime managers can achieve reductions in overtime costs without affecting service quality Introduction

9 Berkshire Advisors supports efforts to manage overtime to control costs and improve services in a number of ways Assess and categorize current overtime usage Compare the cost of overtime with the “fully loaded” costs of additional full- time employees Distinguish between discretionary and non-discretionary overtime expenditures Evaluate how discretionary overtime has been used and develop strategies to control these expenditures Develop long-term strategies for controlling non-discretionary overtime expenditures Develop approaches for monitoring and managing overtime expenditures over the long-term How Berkshire Advisors Can Support Efforts To Manage Overtime