Looking to Reduce Your Overtime?
Find out how to protect your profits and improve this important metric.
As a service contractor with a distributed workforce, labor is always going to be your largest expense. And overtime for hourly employees is the number one profit-killer, particularly in service industries with thin margins. What if you could reduce your unbillable overtime by 20 or even 30 percent? What kind of cost savings would that equate to for your company? According to IBIS World’s 2018 report, wages and associated employee benefits accounted for 48.1 percent of expenses in the janitorial industry and 61.5 percent of revenue in the security industry. When one expense category consumes half of your revenue, it’s critical to control the things you can, like overtime, to keep your business profitable.
The secret to reducing overtime? Stop it before it starts. That’s why we’ve compiled several ways to reduce overtime for service contractors to help you get a handle on overtime and meet your business goals.
1. Know your service-level agreements (SLAs).
SLAs dictate the service standards and pricing obligations you’re required to deliver to your customers. If your contracts do not allow you to bill your customers for overtime, you’re still on the hook for paying it — because legally you have to. That means any overtime your cleaners or guards incur is coming directly out of your bottom line, eating into your already paper-thin profit margins. Even if your SLAs allow for overtime to be billed back to the client, you still need to keep it in check so you’re delivering the service your clients want at the price they’re prepared to pay. Your clients expect a certain level of service, and that can’t be compromised simply because you don’t have any workers to do the job who won’t be on overtime.
2. Use an integrated scheduling software — effectively.
If you’re still using paper (and yes, that includes spreadsheets) to schedule your employees and track their time, you typically can’t spot overtime problems until after they happen. You’re probably also spending a lot of time doing tasks that could be much easier, or even automated, with the right software. Consider a technology upgrade.
Even if you have scheduling software in place, make sure you’re leveraging all the features effectively. If your scheduling solution is worth its salt, you should be able to see the schedule for the week and in context with adjacent weeks to spot any overtime problems before they happen. In fact, your solution should be able to alert you to those issues as you’re scheduling people, as well.
It’s also crucial that your software solution help keep you in compliance and up to date with labor laws in the jurisdictions where you operate. You still need to pay attention to legislation updates and overtime requirements, but it’s beneficial if your tool can help keep everything in check.
If you’re not comfortable with your software, if you have newer employees or if you simply need a refresher on best practices, it’s worth contacting your software provider for hints, tips and extra training to help you get the most out of your investment.
Pro tip: Appoint a lead account manager. This person is responsible for ensuring all account managers know scheduling procedures and have access to all tools and policies to do their jobs efficiently. This person should also review and compile relevant key performance indicators (KPIs) related to scheduling. You should be using all the reports available to track trends and pinpoint issues and automate as much of your scheduling process possible.
This article highlights two of the ways service contractors can reduce overtime. For the complete list, download our free Guide to Reducing Overtime.