Optometric Management Tip # 360   -   Wednesday, December 31, 2008
Keeping Payroll Costs Down

During these difficult economic times, practice owners and managers tend to look harder for ways to keep expenses down. Of course, from a management perspective, we should always be vigilant about reducing costs, but it rises to the top of our to-do lists when times are tough. I think this is a great time to review expenses and find ways to conserve without reducing service. That is the difficult part; it would be easy to cut costs, but many cuts would have a negative impact on quality or customer service and then it would be ill-advised.

If we look at the major expense categories, staff compensation is the largest other than cost of goods sold. Payroll plus benefits usually ranges from 17 to 23% of gross practice revenue. But if we look to trim payroll expense, we must be very careful because cutting the number of employees can quickly damage customer service and office efficiency. I think most practices are understaffed in general, but during tough economic times we must project with awareness of the possibility that patient volume may drop in the near future, which means less staff would be needed.

Determining the correct number of employees requires individual practice analysis, but here are some ways that any practice may be able to trim employment expenses, without changing the number of staff members.

Work hours add up

Most of the tips listed below revolve around employees increasing their work hours (and the resultant wages) to amounts that are greater than actually scheduled. If we look at the way offices actually function, many small details are not designed by the owner, but rather simply evolve. Over time, the way we do things becomes policy. These policies, which usually work out in the employees' favor, can be changed or corrected. Consider the following factors for your hourly wage employees.

Time clock

If we're going to try to reduce unnecessary work time, we first need an accurate way to track it. If you still have employees record their hours on handwritten time sheets, I strongly recommend you adopt a computer software program that functions as a virtual time clock. Having the punch in and punch out process on an office computer is simple for staff to comply with and having the data stored electronically makes reporting and calculating wages easier than doing it manually. Time sheets based on the honor system are routinely inaccurate and always in the employee's favor. You'll save money simply by recording actual work time to the nearest minute. There are many time clock programs available at low cost or no cost. Just do an Internet search for time clock.

Start time

If employees show up at the office much earlier than their scheduled work time, you may be paying more in wages than you really need to. Of course, it may seem a little strange to have to correct an employee who wants to work harder we may feel like such behavior should be rewarded! But if the practice is paying by the hour and if that work could be completed during the normal scheduled hours, then the extra time is simply increasing the staff member's total pay.

Consider adopting an office policy that employees may not punch in more than ten minutes before their scheduled start time, unless they have the owner's or manager's approval in advance. Employees may say they have work they must catch up on, but it's up to the boss to determine if that work could be completed during regular hours.

Staying late

This is simply the converse of the previous issue, but it may be harder to supervise the work if only a few employees stay late. Again, it seems like this effort is for the good of the office and there may be work that has accumulated all day that staff members feel they must finish, but if the work flow was better organized, the extra time may not be needed.

Lunches

Another creative way to increase one's hours is to skip lunch, or just take a very short break while still on the clock. Of course, having an employee who is willing to work through the lunch hour could be great, if it's really helping the practice.

We schedule patients around the lunch period in my practice and I expect employees to take the full lunch break. They can't just skip lunch and be paid unless they have approval from management. We take lunch in two shifts and staff sign up at the start of the day to take first lunch or second.

A good track record

I like to see the office establish a good track record of closing at the end of the day on time. The same goes for starting lunches on time, which then allows the afternoon appointments to start on schedule. If you adjust the patient schedule slightly and everyone makes an effort, it's not hard to achieve. All employees should understand that patient care always comes first and the office may run late sometimes; if it's a rare occurrence they usually don't mind.

A good track record of being on time shows employees that you respect their personal life and it makes it easier for you to control start times and quit times.

40 hour week

Employees who find a way to work more than scheduled not only increase payroll costs, but they could also push their work hours into overtime. Overtime pay is regulated by your state government and generally requires time and one half wages. Beware of employees who say they don't require time and a half pay and that they will work overtime for the standard rate. I would not allow it. The state employment office can force employers to pay additional wages long after the pay period and they can require interest and penalties. If hourly employees work more than 40 hours per week, you should pay them the overtime pay rate specified in your state or don't allow the overtime.

Change

If you are just starting a practice, you may be able to prevent these wage increasing factors by establishing good work policies, but if your practice is already established, change can be a difficult. Any change of policy that takes away income from an employee can be upsetting, even if it is over and above what was agreed upon. In some cases, I make policy changes effective for all new employees while allowing veteran staffers to continue with an understood exception; a grandfather clause, if you will. But when businesses face tough times due to the national economy, some belt tightening may be in order.


Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management