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Why Managing Labor Costs Needs to Be the #1 Priority in Senior Care

May 22, 2017 | Peter Corless

Managing labor costs should be a top priority in senior careThe challenging environment in senior care has hit providers harder than ever, making it difficult – sometimes impossible – to stay ahead. Increasing wage pressures coupled with a workforce shortage mean providers must prioritize their organization’s spending to achieve positive financial results and growth into the future.

Nothing will be more impactful to your bottom line than how you manage your largest expense – labor. All it takes is careful and consistent planning and monitoring to produce positive results. Eliminate excess dollars spent and see significant savings by focusing on the following: overtime, staffing to budget and employee retention.

OnShift works with senior care providers throughout the country to help optimize their staffing and labor management initiatives. Here are proven labor cost management practices that improve your bottom line.

Control Overtime Expenses

Most employee overtime in senior care can be prevented, but first, it’s important to understand the impact that it can have on your labor budget. Just a 1% cut in overtime can save a community $24,000 - $60,000 annually (depending on community size). Due to the labor shortage, many providers have seen overtime creep up to greater than 6%. Even a small decrease can have a dramatic impact on your bottom line. Here are two practices that can help you curb your organization’s overtime expenses:

  1. Proactive Scheduling: Learn from the past but look to the future. Many providers manage overtime by analyzing past pay period performance which, while perhaps informative, is not the best use of valuable time because it is a reactive approach. The data is historic and it’s too late to fix any issues. For this reason, manual employee scheduling is inefficient and makes it difficult to identify and track metrics related to overtime.

    To be effective, schedulers need visibility into potential future overtime (hours worked + future hours scheduled) when they create the staff schedule. They must stay on top of schedule updates, managing changes like fluctuating census, call-offs, time-off requests, etc. Scheduling is a dynamic process that needs continuous TLC. Proactive employee scheduling software that identifies staff members at risk of incurring overtime gives schedulers a clear picture of where overtime will happen so they can easily choose a more cost-effective replacement.

  2. Open Shift Management: Last-minute call-offs can quickly cause a downward spiral in senior care. They cause management to drop what they’re doing and spend hours calling employees to find a replacement. And when their efforts aren’t fruitful, they often resort to bringing in agency workers-which can be even more costly than overtime and a detriment to resident care. 

    Instead, when someone calls off, management should be equitable by asking all employees who qualify if they would like to work the available shift. Employee scheduling software like OnShift identifies all available and qualified staff workers at the time of a call-off so the best choice replacement with the least overtime risk can be selected. Providers will find significant savings with more efficient shift management practices. 

Managing overtime is a critical step in cost management and can be done with technology that gives you the tools to monitor and prevent it.

Balance Your Staffing Levels to Budget

The primary mission for senior care organizations is to provide high-quality care. But we have all heard the mantra “no margin, no mission.” Looking closer, there are potential cost savings to be had by monitoring and adjusting staffing levels to consistently hit your labor budget. Put flexibility at the core of your labor budget management strategy, so managers and schedulers can flex headcount as your census fluctuates.

Consistently staffing to meet your residents’ needs, without over-staffing, can drive significant savings. For example, with a tighter staffing level alignment of .1 hours per patient day (HPPD), a community can save $75,600/year (based on a 100-bed community).

To balance your staffing levels, focus on these three areas:

  1. Set Staffing Level Targets: Balancing staffing levels will be most successful when your scheduler knows what their goal is. Targets should be set for each shift by position to guide scheduling. Often these are set based on census/occupancy levels, while also considering resident acuity and service level needs.
  2. Pinpoint Requirements: As a best practice, schedulers should evaluate staffing requirements and look at staff assignments daily. They should review punch data and remaining scheduled hours to calculate projected staffing levels. This will help to identify any major staffing gaps or overstaffed shifts.
  3. Project Fluctuations: Schedulers should compare labor to needs based on an estimated future census and adjust accordingly to ensure communities are operating with balanced staffing plans.

By becoming flexible with staffing assignments and adjusting based on changes, providers can not only control costs, but can also ensure that they have the right number of staff on hand to provide high-quality resident care and service. It’s all about finding the right balance.

Focus on Retention

Employee turnover is a massive problem, with many facilities operating at an estimated 50% turnover rate. This means that a skilled nursing facility with 100 direct care employees spends over $200,000 annually in replacement costs resulting from turnover1. Some providers are even operating with turnover rates that reach 70-80%2, which is not only extremely expensive, but directly impacts the quality of care residents receive. And don’t forget to tack on the fact that senior care will need an additional 2.5 million caregivers by 2030 to the situation. Holding on to the employees you have has never been so important.

Most turnover occurs in the first 90 days on the job, so providers must hit staff satisfaction at the start and be consistent into the future. Here are three areas to evaluate and improve upon for reduced turnover and greater employee satisfaction:

  1. Onboarding: It all starts here, so bring new hires aboard with a bang. Make sure your community’s training process is both informative and interactive. Conduct 4-hour sessions at a time, engage employees with quick-hit content and be sure to leave time for socializing-both with the other new hires and with key staff members. Managers should discuss each employee’s desired work schedule at this time to show them you care about their unique preferences and needs.
  2. Communication: There are many aspects to successful employee communication. First, make sure managers keep staff in the loop when organizational changes occur, especially when the change affects them. Managers should also facilitate open lines of communication by encouraging staff to offer to voice any concerns or problems they may have. The largest segment of the workforce, millennials, values and responds to open and honest communication with their managers. In fact, 72% would like to be their own boss. But if they do have to work for a boss, 79% of them would want that boss to serve more as a coach or mentor.3
  3. Recognition Programs: Show hardworking employees that their dedication is appreciated. Put a rewards program in place to incentivize key behaviors that align with your mission. When the milestones are reached, congratulate the winners and share the news with staff via a small celebration or other public recognition gathering. Employees will be motivated to perform by a little friendly competition, which will help keep them involved and on target. Software that tracks each employee’s tenure, punch-ins and punch-outs allows you to easily distribute rewards as they’re earned and address any performance issues. 

Employee engagement software provides a systematic approach to ensure successful execution of these initiatives. The result? An engaged workforce improves your organization's performance, quality and profitability. 

Technology is Your Cost-Cutting Comrade

Providers today have the benefit of technology that can target and monitor their specific cost-related challenges. And those that have leveraged this technology, like OnShift’s staff scheduling, engagement and labor management platform, have seen positive results when focusing in on these three practices. Some providers cut 50+% of their unnecessary labor costs within the first 90 days. Consider how that extra money can be applied elsewhere, positioning your organization for future success. As wage pressures and labor shortages continue to increase, the only path to high performance is one that leads the way with an efficient labor management strategy. 

1 Average Cost of Turnover. Bases on information from the American Health Care Association Cost of Turnover Calculator.
2 OnShift and McKnight’s Long-Term Care News survey of long-term care and senior living providers on workforce initiatives, 2016.
3 What Millennials Want In The Workplace (And Why You Should Start Giving It To Them). Rob Asghar for Forbes, 2014.
Empowering Customer-Centric Healthcare for Post-Acute Providers. National Research Corp., 2014

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About Peter Corless

Peter Corless is Executive Vice President of Enterprise Development for OnShift. Peter is a recognized HR leader in post-acute care and is well-known for his achievements at some of the country’s largest post-acute care organizations, including Kindred Healthcare and Genesis HealthCare. As an experienced, chief administrative and human resources officer within these organizations, he developed strategies that reduced turnover, improved recruiting and hiring strategies, and reduced labor costs.

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