An Update for Senior Living Providers on Minimum Wage Measures

Senior living providers, take note—the country is making moves on minimum wage hikes.

Both New York and California recently approved measures to gradually increase the minimum wage, meaning that workers in those states will soon be eligible to earn $15 an hour. In Pennsylvania, most certified nursing assistants, or CNAs, secured a new collective bargaining agreement forging a pathway to $15 an hour.

Gradual implementation

Gov. Jerry Brown’s signature on the California legislation boosts the state’s hourly wages from $10 to $10.50 beginning in 2017 and $11 an hour in 2018, and from there, more than 440,000 health care workers in the state will see a $1 increase annually until 2022. In New York, the uptick in minimum wages included in the state Legislature’s budget agreement could cost hospitals, nursing homes and home care providers $2.9 billion if implemented in 2021, according to estimates from the Healthcare Association of New York State.

The momentum behind the fight for a higher wage continues to grow across the nation, as workers across several industries, including fast food, retail and health care, push for $15 an hour.

The associated costs and implications on senior living providers could be detrimental if they aren’t proactive and neglect to bake minimum wage increases into budgets well before they take effect. This is true not just when it comes to funding the uptick in minimum wages, as there will be pressure on pay across the board.

Preparing early

Changes to employees’ base pay surely prove expensive, but adjusting other employees’ salaries to mirror the uptick in minimum wages could cost companies even more. Determining where to absorb those differences in costs will be crucial moving forward as such measures take effect and other states and municipalities consider their own minimum wage increases.

If the costs are simply passed on to residents, for example, it might be difficult to attract new residents, and providers could see a hit to occupancy. Some organizations might see hiring fewer senior care workers as a solution, but that could mean loading current employees with work previously handled by more people, thus creating a more stressful environment.

Controlling Labor Costs

Utilizing your workforce in the most efficient way possible is crucial. Labor is typically your largest expense, but if managed properly, you can find ways to cut costs without cutting staff. As wage pressures increase you should look at controlling your labor costs by reigning in overtime that typically occurs in three key ways.

1. Frictional overtime—Frictional overtime often occurs as a result of last minute call-offs. In fact, a survey we recently completed with McKnight’s Long-Term Care News, revealed that 72% of senior care organizations said last minute call-off were their biggest driver of overtime. Consider your current procedures for filling shifts that open up at the last minute. Do you have visibility into which employees are the best choices to fill that shift? Can you quickly reach targeted employees to let them know a shift has been opened? These are the questions you should ask as you develop processes to deal with frictional overtime.
2. Incremental overtime—Incremental overtime results when employees punch-in early and punch-out late. Employees that punch-in early and punch-out late can quickly add to overtime expenses. Having access to this punch data is critical to controlling incremental overtime. Compare punch data to the schedule to determine where overages are coming from. Once employees are aware that you are tracking it, this type of overtime can be quickly reduced.
3. Scheduled overtime—The easiest way to prevent overtime in the first place is to stop scheduling it. Scheduling efficiently is key in controlling labor costs. Keeping tabs on your current census and staffing accordingly will ensure you are not paying for unnecessary labor. Rather than waiting until after payroll to see how much overtime has occurred, adopt solutions that can help predict and prevent overtime before it happens so corrective action can be taken.

There’s no question that the age of a higher minimum wage is upon us. Paying employees more isn’t something that can be avoided. It’s time that senior living providers rise to the challenge in coming up with innovative strategies to free up funds to afford the changes, or risk taking a hit to their bottom line. Preparing early will set providers apart in California and New York, and in any additional states that adjust their minimum wage laws in the future.