Get a grip on practice labor costs


Some of use might have taken a peak at last year's support staff labor costs and discovered that labor costs have risen way over the anticipated budget.

Some of use might have taken a peak at last year's support staff labor costs and discovered that labor costs have risen way over the anticipated budget.

It is time for us to figure out how to contain support staff labor costs,improve morale and give raises, while continuing to attract good talentto interview for positions at our veterinary offices.

One tried-and-true method to help ensure long-term practice growth isto improve service: Improve service and the practice grows.

First rule: excellent staff

A first rule to improve service is excellent staff to provide excellentservice.

The more traditional method of hiring is "need" based. Hirefolks as they are deemed to be needed. "Need" hiring is relativelyreactionary and does not necessarily improve service.

Reactionary hiring is a tried and true measure to contain costs. Unfortunately,this method results in stressed workers and ensures turnover of employees;very bad for morale and subsequently leads to poor service.

Now back to improving service to ensure growth. Attentive practice managerslook down the road a year or two. They consider the practice staffing needsin advance and then move the practice and the staff in that direction.

They consider whether in a year or two the practice will need anotherreceptionist, another technician or more veterinarians. How does the practiceachieve these needs, while holding onto the current good staff and attractinggood new members to the hospital team?

Raw labor cost

A general rule of the free enterprise system is the folks will drifttoward the wages and the quality of the workplace. Let us consider theraw cost of labor.

Within the current economy and in the broad topic of support staff laborcosts, there is some movement across the country to ensure "livingwages" in some communities. A living wage is a salary needed to sustaina decent living above the poverty line.

The issue here is that "minimum wage" is not considered a "livingwage". Some practices will feel a labor pinch if they are not alreadyproviding living wages; the pinch being that practices with total averagewages that are closer to the minimum wage will have a difficult time findingand keeping good staff.

So it might be good for the veterinary practice to consider keeping theaverage payroll hourly rate near the living wage to attract and hold keypersonnel.

Pertinent to this discussion is the topic, really principle, that supportstaff labor is a variable expense. For some time in veterinary practicessupport staff labor was considered to be a fixed cost. But years ago wediscovered that income varied with the numbers of support staff and notwith the number of veterinarians. It does seem today that most agree withthis assessment, yet when we look at most accounting statements supportstaff is listed under fixed costs. (The time has come for all of us to takeanother look at how our accounting statements are put together.)

The cost of support staff labor is to include all expenses related tostaff: insurance, withholding, employers share of withholding, benefits,and the gazillion little things the local and national government do tomake life more difficult for the small business world.

To figure all this out requires some time with pencil and paper, andmaybe a calculator for those so inclined.

Information needed: gross income for last year, gross income desiredfor the next 12 months, payroll cost for support staff, total hours workedfor the year, and the clinic open hours schedule.

One question that needs to be answered will be what are the busiest daysof the week and what are the busiest hours of the day?

Labor Planning Outline

* Gross for last year: $500,000

* Desired growth for next 12 months: 15%, $75,000 added.

* Total anticipated gross for the upcoming year: $575,000.

* Total hours worked by staff last year:16,700 hours .

* Cost of labor for last year: 30%, or $150,000

* Average wages for the last year: $9/hour ($150,000 divided by 16,700).

* Desired cost of labor for next year: 27% or 155,250.

* Desired average wage for the next year: $11/ hour.

* Schedule hours permitted for the upcoming year: 14,113.

* Thus schedule hours per week: 52 weeks into 14,113 comes to 271 hoursper week.

* Scheduled hours per day, with a five-day work week comes to 54 hoursper day.

Now place workers in positions that provide the most coverage for bestservice

* Receptionist: 8 a.m. to 6 p.m. is 10 hours R1

* Technician: 8a.m. to 6 p.m. is 10 hours T1

* Reception second: 8 hours R2

* Technician second: 8 hours T2

* Reception third : 6 hours R3

* Technician third: 6 hours T3

* Floating Staff Member: 4 hours F1

Totals: 54 hours per day

The following schedule (Table 1) is not done to a time scale, but theprinciple issue is that staff can be placed where they are most needed duringa day.

This sample schedules permits job sharing, prioritizes positions, andenables veterinary clinics to place a price value on these positions andtheir relative value to the clinic. R3 and T2 may actually be the mosttreasured members of the staff. Assign them the highest hourly salary.

One has $594 daily dollars to distribute to the staff. Place the highestpaid folks in the positions where they generate the most value to the clinic'smission.

Orderly planning of staffing surrounding client needs maximizes productivity,which enables the practice to pay a higher wage.

Clients receiving better service during their visit will perceive a highervalue and pay for these services.

The flexibility of the sample schedule permits "flexi-scheduling,"a key benefit of the veterinary workplace.

The longer shifts can be split or used as job shares. Places in the scheduleexist for part time, full time, and virtually any combination of hours neededto support practice and staff needs.

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