Plugging Payroll Leaks
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There’s a fine line between justified overtime brought about by operational demands, and overtime in which employees “work the clock” to their advantage. With labor costs gobbling up between 40% and 60% of a hospital’s budget, defining that line and catching those overtime missteps is increasingly important. Moreover, taking a strategic approach to scheduling employees can further slim costs without the need for layoffs.
Payroll leaks, or the unintentional overspending on labor through lost productivity or unnecessary overtime, can cost a hospital millions. Most healthcare finance and human resource leaders say their labor costs are too high, yet many can’t pinpoint where to trim. According to human resources industry experts, some of the culprits behind these payroll losses include employees:
- Failing to report time accurately
- Logging unnecessary overtime—employees staying late or arriving early without cause
- Having attendance problems (e.g., late arrivals or long breaks)
- Being overstaffed for demand
Trimming labor costs by even 1% is a challenging task, but some hospitals and health systems have begun the time-consuming process of analyzing time and attendance data by department to uncover patterns of payroll leaks.
Bernie Becker, chief human resources officer at the Topeka, KS-based Stormont-Vail HealthCare, found his 405-staffed-bed hospital was having a problem with its on-call and overtime; the cost was continually rising. He turned to his time management data to explain the cost increases at the organization, which consists of a medical center and 27 physician and clinician offices and outpatient surgery centers.
“Our payroll system tracks hours and types of pay, but it doesn’t go deep enough,” says Becker. “Whether there is higher volume, heavier procedures, or unexpected absences, we are trying to get control over when we are paying that premium pay.”
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