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

2. 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

3. 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

4. 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

5. 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

6. 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)

7. 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

8. 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

9. 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

10. 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.

11. 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

12. 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.

13. 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.