Cost-Saving Ideas: Overtime Planning and Management
Reducing the cost of employee salaries and benefits by even a small percentage can result in significant savings.
Employee salaries and benefits, including pension benefits, are large expenses for New York's local governments and school districts. These costs represent nearly 57 percent of annual budget expenditures, on average.
Overtime wages can significantly increase personal service1 and pension costs. For example, 8 to 30 percent of wages paid to highway employees in New York State are for overtime.
A written plan to guide the assignment of overtime hours in the most efficient and effective manner can help control overtime costs. When local governments and school districts analyze the factors that lead to overtime, they may be able to reduce or eliminate overtime through the use of alternate work schedules.
Alternate Work Schedules
Alternate work schedules (AWS) may allow employees to work other than traditional eight-hour workdays. AWS can potentially increase productivity and hours of service, relieve traffic congestion and reduce personal service costs. Alternate work schedules should take into consideration operational needs, employee concerns, as well as legal and regulatory requirements and terms negotiated in union contracts. If considering the use of an AWS, a local government or school district should also consult with its legal counsel, as appropriate.
- Five-day flex schedule: Regular start and end times, but allows for changes in these times to accommodate work demands. If employees are called in before their scheduled start time, they can be asked to leave early instead of working until the end of their normal work day.
- Five-day, eight-hour schedule with alternate shifts: Provides additional coverage during peak times by having different shifts for different groups of employees.
- Four-and-a half-day schedule: Reduces overtime by having employees work an extra hour Monday through Thursday and a half-day on Friday.
- Four-day, 10-hour schedule: Reduces overtime by having employees work an hour earlier and later Monday through Thursday. If you use this schedule, you must consider that overtime averted on Monday through Thursday may only offset overtime incurred on the fifth work day.
- Four-day, split-crew schedule: Provides five-day coverage, but splits the crew so that half the employees work 10-hour days, Monday through Thursday, and the other half work 10-hour days, Tuesday through Friday.
Audit demonstrates cost savings
An audit by the Comptroller’s Office compared the overtime costs for highway employees working an alternate work schedule to the traditional five-day, eight-hour schedule. It found that the nine towns examined could have saved between $15,000 and $159,000 in overtime wages by using one of the alternate work schedules.
In addition, savings for associated costs, such as the employer's share of Social Security and Medicare payroll taxes, workers' compensation premiums, and retirement costs, could increase cost savings an additional 20 percent.
With such a significant portion of your annual budget dedicated to employee benefits and salaries, it’s important to be proactive in your approach to managing these costs.
Fair Labor Standards Act and the New York State Taylor Law
In implementing actions relating to overtime, keep in mind that Federal Fair Labor Standards Act provisions (29 USC Sections 201 et seq.) may come into play, as well as collective bargaining principles under the State's Taylor Law (Civil Service Law article 14).
1 Personal Service costs may include salaries and wages, as well as the local government’s share of payments for certain other employee benefits.