HOW AGENCIES CAN AVOID DEFICITS
FROM A LEADER IN AGENCY WORKFORCE MANAGEMENT SOLUTIONS www.mitcsoftware.com
HOW AGENCIES CAN AVOID DEFICITS
MINIMIZE THE DANGER OF BUDGET OVERRUNS It is now more important than ever to control costs tightly and maximize billings to help avoid deficits. The biggest single cost for most agencies is payroll-related costs. At many agencies, especially those with offsite residential and supported living programs, payroll is a major cause of cost overruns. This publication and the accompanying power point presentation explain how agencies can minimize the danger of budget shortfalls by following six simple steps: Approve payroll hours against budgeted hours Control overtime Optimize workforce usage using a centralized scheduling system Implement a structured payroll approval system Establish payroll budgets Enforce compliance
APPROVE PAYROLL AGAINST BUDGETED HOURS Many agencies are not used to controlling payroll in real time, before payroll is authorized, as most for-profit organizations do. Often, agency payroll departments do not know how
“It is now more important than ever to control costs tightly and maximize billings to help avoid unnecessary costs.” Disputed hours can be queried or withheld until resolution is achieved. Using paper timesheets typically costs 1–3% of gross payroll. Payroll leakage is caused by several factors including:
many hours are budgeted for each cost center. Managers
Timesheet falsification
approving timesheets may be too busy to make more than
Payroll data entry errors
a cursory attempt to verify hours worked, or do not have the
Manual miscalculations
information to validate hours worked. The first step to reining in payroll costs is to establish budgets by location and client. This helps to highlight overruns caused by low-level payroll fraud, unauthorized attendance, overlapping shifts and inaccurate scheduling, before payroll is approved. Use variance reports to track hours by employee,
Under/over hour reports also highlight missing billable hours for client services. For instance, individualized services are usually provided under a plan-of-care. Hours provided in excess of the plan-of-care may be denied for payment and hours not provided may not be recoverable.
job location, manager and program before payroll is approved.
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HOW AGENCIES CAN AVOID DEFICITS Creating hourly budgets by location or cost center is relatively easy to maintain, as budgets change relatively infrequently. Using variance reports makes payroll approval quicker and much more accurate. Any budget variances are easily spotted using simple summary hour variance reports by cost center or location. More detailed information can then be obtained where discrepancies are highlighted. Ideally, time and attendance should be captured in real time to allow these decisions to be made before problems occur. Sometimes agencies are not even aware of payroll overruns. When Passages Inc in Indiana implemented a new time and attendance solution, the goal was to eliminate the costs of handling paper timesheets. Subsequently the agency was surprised to see overall payroll costs decline by an average of 1–2% per month.
“Using variance reports makes payroll approval quicker and much more accurate.”
CONTROL OVERTIME
MCDS in Kansas reported a 20% decline in overtime within
Overtime cannot be eliminated, but can be minimized. Many
six months of implementing a new system. For 100 staff that
agencies run 10–15% overtime in Residential and Supported
might be a $30,000 annual saving.
Living Programs. Agencies implementing a structured overtime control plan have achieved 20–80% reductions over a period of time. This can have a dramatic impact on deficits, as overtime is
How much fundraising would an agency need to do to achieve the goal of $78,000 in savings?
often not included in budgets. Overtime is caused by many factors:
Look at the example below involving only 100 employees. NOW
GOAL
Number of Staff
100
100
Average Pay Rate
$10
$10
Overtime %
10%
5%
Annual Overrun
$156,000
$78,000
Saving
$0
$78,000
Low-level payroll fraud Overlapping shifts Unauthorized attendance Low compliance with agency policies Ineffective scheduling Sub-optimal hiring Absenteeism Agencies need reporting systems that track overtime based on its origin, cost center and manager to identify the sources of payroll leakage and cost overruns.
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OPTIMIZE WORKFORCE USAGE WITH A CENTRALIZED SCHEDULING SYSTEM Implementing a structured scheduling system allows agencies to minimize prescheduled overtime, fill open positions and avoid using employees already in overtime. The same system will allow actual hours worked to be tracked against scheduled hours. This is very important in any campaign to root out unnecessary overtime. For instance, one employee’s overtime might be the result of another employee showing up late. Just reviewing an overtime report might not pinpoint the real cause of the overtime, which could be another employee’s tardy behavior. Similarly, overtime in one cost center might be the result of poor scheduling in another cost center by another manager. Ideally, overtime-reporting systems should automatically allocate the overtime cost to the most appropriate cost center (not necessarily the one where the overtime physically occurred). For instance, if an employee works Monday through Friday 40 hours in a Day Program, but works an unscheduled shift at a Group Home on Wednesday, the overtime should be allocated to the Group Home, not the Day Program where the employee
“Implementing a structured scheduling system allows contractors to minimize prescheduled overtime, fill open positions and avoid using employees already in overtime.”
is scheduled to work. Eliminating excessive prescheduled overtime may require the hiring and training of additional staff or greater use of part-time staff, whose hours are normally less than 40 hours
per week. Some of the changes are not easy. It will require time, patience and perseverance from senior management to provide leadership during the transition. However, the rewards are significant. Prospect, Inc in Tennessee reported a 50% drop in overtime in its residential program six
“Ideally, overtime-reporting systems should automatically allocate the overtime cost to the most appropriate cost center.”
months after implementing a new system. In addition, the agency was able to reduce time staff spent preparing and reviewing timesheets and billing by more than 50%. An efficient scheduling system allows agencies to identify critical days, such as holidays, weeks in advance and identify available staff for those days.
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HOW AGENCIES CAN AVOID DEFICITS Some agencies opt for a centralized scheduling system with administration taking over the function of filling open positions. Other agencies leave the responsibility with their managers and hold them accountable for any cost overruns.
IMPLEMENT A STRUCTURED PAYROLL APPROVAL SYSTEM At many agencies there is little or no integration between payroll, schedules and budgets. Schedules are often in one place, such as in Word or Excel documents, payroll in another, and budgets inaccessible to managers in general ledger. The result is that no one is in control on a day-to-day basis of an agency’s biggest single cost – payroll. The consequence is cost overruns and deficits. Change is not easy. But counting paper clip consumption
“Tracking payroll cost variances to payroll budget will highlight cost centers with overtime, compliance, scheduling and/or attendance problems.” budget and schedule. Disputed hours may be withheld until clarification is achieved, even if that results in the pay for that shift not being processed until the next payroll. Ideally, hours worked should be reviewed daily and approved weekly, not just after the pay period has closed.
is probably not going to turn around a budget shortfall or
Employees should be provided with a clear statement of the
deficit in these unprecedented times.
details of their hours worked either on their payroll check stub,
Hours worked need to be reported by employee, job, client, manager and program. Payroll should be approved against
in a separate report enclosed with the payment, or on the internet.
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ESTABLISH PAYROLL BUDGETS You get what you inspect, not what you expect. During and after each payroll, it is important that agencies are able to identify the exact source of any cost overruns by manager, employee, and program on an ongoing basis to ensure that weak practices are minimized or eradicated. Tracking payroll cost variances to payroll budget will highlight cost centers with overtime, compliance, scheduling and/or attendance problems. Payroll and any subcontracted costs need to be included in the actual budget. “Manage at a glance” with graphs generated in Excel to display adverse trends by agency, cost center or program.
ENFORCE COMPLIANCE Establish organizational goals to reduce payroll costs and keep
Written rules in the form of amendments to the agency’s employee handbook are required. Employees should sign a new agreement and the same should be incorporated into new hiring procedures.
your agency on budget.
Rewards for good performance can take the form of additional
For instance, if overtime is 10% of payroll in a particular
customer provides a pizza party each payroll period to groups
program, the goal might be to reduce it to 5% over 6 months.
whom clock-in/out 100 % on time. Another MITC customer
Establish penalties and rewards for managers and employees.
provides a small flat- amount bonus if employees work their
In for-profit organizations, it is not uncommon for manager compensation to be tied to the ability to minimize overtime.
individual compensation for a group of employees. One MITC
scheduled hours 100%.
change through better timekeeping and scheduling of
TIME AND ATTENDANCE SOLUTIONS THAT WORK FOR AGENCIES
resources.
Indiana Agency Reduces Payroll 2-3%
Track employees who fail to comply with agency policies,
Passages Inc., of Columbia City, Indiana is the leading provider
have attendance issues, arrive late, leave early, take unplanned
of services for people with disability in their region. In an effort
absences, etc. Forgetting to clock-in/out accurately is an
to efficiently and accurately control their payroll costs, Passages
attendance violation. It is no different from not submitting a
Inc. implemented an automated Time and Attendance and
timesheet or time record.
Scheduling System.
Employees who forget to clock-in/out should suffer a delay in
Passages’ initial need was to eliminate the burden of paper
payment for that shift while the failure to comply with agency
timesheets. The time and attendance system installed at
policy is investigated.
Passages allows off-site employees to quickly clock in and
Share the savings with managers responsible for achieving
Without consistent and strong compliance policies, employees are rewarded for forgetting to clock-in when they are late or leave early.
out. Supervisors and administrators can now easily see when employees begin and end their shifts and approve timesheets electronically. Passages’ CFO, David Lehman was pleasantly
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HOW AGENCIES CAN AVOID DEFICITS surprised to find the benefits of this system were more farreaching than he had anticipated, saying “We originally decided to implement an automated Time and Attendance system
SERVICES AVAILABLE
system to to eliminate paper timesheets, streamline payroll and
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REDUCE PAYROLL COSTS
achieve greater accountability. I was surprised, and pleased, by
Save time and money with precise records
the significant reduction in payroll hours. It has been around
of employee work times and dramatically
2–3%. There must have been more payroll mistakes in our old
less administrative work.
system than we thought. “These savings are tremendously important to our agency at a time of reduced revenues from other sources.”
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Track time and attendance with the flexibility to address staffing issues
Passages Inc, is now able to devote less time, energy, and
anytime, anywhere!
resources to timekeeping and attendance and instead devote it to the programs and people they are most passionate about.
EASY TRACKING METHODS
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DATABASE MANAGEMENT
Use MITC to track jobs, clients, employees, supervisors, and schedules.
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ONE INTEGRATED SYSTEM
Individual solutions offer flexibility to meet your particular organizations unique time and attendance needs (and much more).
ABOUT MITC MITC provides modular workforce management solutions and services to support all the needs of agencies — time and attendance, advanced employee scheduling, service documentation, payroll rules and reporting engine, workforce analytics, payroll and billing integration, and more. For 25 years, MITC has grown to serve over 1,500 organizations (with anywhere form 5 to 10,000 employees) in the USA, the UK , Africa, Australia, Canada, Ireland and New Zealand. They have selected MITC to help control costs, save time, improve productivity and ensure compliance.
Visit www.mitcsoftware.com to learn more.
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