All About Overtime, Part 1 - Basic Analysis

Overtime is probably the most often reviewed aspect of labor expense, partly because the overtime line tends to stick out on most P&Ls and partly because Property Leaders tend to jump on overtime as a way to engage in a larger discussion on operational efficiency. To aid in the understanding of overtime usage many Casinos and Hotels establish simplistic reporting thresholds for Job Class overtime hours as a percent of total hours worked (a 3% weekly threshold is common), exceed the established target and Operations will usually feel the heat. The questions usually go something like “was the overtime justified?” Or, “how can overtime expenses be reduced?”

In certain cases there are benefits to the operational use of overtime: overtime provides flexibility to match existing staff to variable guest demand and overtime coverage can be available on short notice, the staff working overtime requires no additional training to deploy and there are no additional wardrobe expenses associated (an especially important point with Job Classes like Casino Cocktail Servers). Finally, overtime can be seen as a morale-booster by some employees looking to supplement their income.

The problems associated with excessive overtime are also easily understood. Not only is overtime expensive, if prolonged it can reduce productivity, create employee morale issues and increase employee turnover. Perhaps most problematic is that some employees, after working prolonged periods of overtime will come to depend on the additional income and will be financially impacted if the opportunity for overtime is removed.

Overtime Work Rules

Understanding your local work rules regarding overtime is essential to producing an overtime analysis as a handful of states currently have work rules in place which supersedes Federal Guidelines. At the time of this writing California, Nevada, and Alaska all have 8 hour daily overtime rules while Colorado has a daily 12 hour overtime rule in place (the Federal rule is based on weekly hours worked). Some states have “rest” period rules in place which dictate the amount of employee time off between consecutive shifts, in Nevada, for example, an employee is eligible for overtime if their base pay is one and a half times the state-established minimum wage and if there is less than 16 hours between the end time and the start time of their work shifts on consecutive days. Note – Nevada employees can be scheduled for 10 hours per day for 4 calendar days per workweek without receiving overtime if mutually agreed to in advance.

Causes of Overtime

Excessive Overtime is almost always caused by one of three conditions:

1. The underlying structure of the Department or Job Class,
2. An incorrect understanding of the Department or Job Class operational conditions,
3. The scheduled availability of Department or Job Class staff.

I find it easier to understand the validity of overtime if I take all of three conditions into account in two different time contexts, first, the actual time of day in which the overtime occurred, and second, the actual duration of each overtime occurrence. Once I have completed my analysis using both time contexts a more accurate assessment of overtime validity can be reported to Senior Leadership.

Analyzing Overtime

Here are some strategies which may help you in preparing an analysis on the validity of overtime usage:

Structured Overtime tends to produce occurrences in durations of 30 minutes or less and is usually a byproduct of either clock management issues or gaps between job class shifts. Review employee historical pay records to identify patterns of potential clock abuse (and associated Supervisory issues), as well as the job class labor standards for shift end times and start times in order to reduce this type of overtime. Structured Overtime should be eliminated as quickly as possible and its trends should not be forecasted in future periods.

Operational Overtime tends to produce occurrences of less than 4 hours and is usually a by-product of some operational need to retain staff. Review the time frame in which these incidents occurred to determine if the overtime was a result of an overall Area Event or if it was due to a specific Property function, note the associated demand driver and review the Employee Schedules in use to determine if a re-deployment of staff can occur when similar circumstances are forecasted. Also note that in some cases Operational Overtime may be caused by intermittent family medical leave being taken during a scheduled shift.

Scheduled Overtime tends to produce occurrences of more than 4 hours and is usually a result of either a general lack of available staff or because a late call-off of a previously scheduled employee. Not enough available staff usually results in an overtime occurrence in the form of an additional day being scheduled, in the case of a call off; the overtime may be a result of an employee working a double shift. In either case a review of the Job Class standards for the same time period against actual staff available will give you a better understanding of whether or not the overtime was justified.

Understanding Incremental Overtime Expense

To complete an overtime analysis it will be necessary to understand the incremental cost of overtime over the use of straight time. For example, a 35% benefit load with 20 annual days of PTO and a time-and-a-half overtime rate would result in a 12% incremental overtime expense of overtime over the straight time rate. The use of Part Time Employees would reduce the coverage expense even more; however, an incremental analysis would need to be performed on the training and wardrobe costs associated with the use of greater headcount to deliver the same number of FTEs.

Next time out we will discuss strategies for effectively managing Overtime expense.

Shift Work Design and the Responsibility of Analysis

Much has been written on the potential impact of Shift Work on Employee Wellness, especially when an overnight shift is required. The Human Species by nature is diurnal, as such we naturally organize our activity around a day-night 24-hour cycle called a Circadian Rhythm where most activity takes place during the day and sleep takes place during the night (some mammals are nocturnal and do the opposite). Within this 24-hour cycle are rhythms of our body’s alertness, temperature, and a variety of other physiological functions; central to the theory of Circadian Rhythm is the concept of an Anchor Period, or, a 3-4 hour period when our bodies demand for sleep is strongest in order to preserve the day-night cycle. Loss of anchor sleep potentially disrupts the natural 24-hour cycle and can lead to chronic fatigue, a variety of illness, and a loss of productivity. Preservation of sleep during the Anchor Period preserves the Circadian Rhythm and potentially offset the negative aspects of performing night shift work.

While an individual may develop over time their own unique Anchor Period, it is generally recognized that the period between 2:00 AM and 6:00 AM is when our body’s natural demand for sleep is at its strongest. Now contrast the 2:00 AM to 6:00 AM Anchor Period for sleep with the three classic shift design strategies:

Continental Shift – Most often used in Europe (although I have seen this shift used in some Table Game Departments), the Continental Shift sets up a 2:00 AM start of day.

Casino Shift – Developed originally to coincide with the Gaming Day (drop-to-drop), the Casino Shift normally sets up a 4:00AM start of day.

Production Shift – Designed around factory production schedules and set up to correspond with the 24-hour Pay Day, the Production Shift normally sets up either a 7:00AM or a 8:00AM start of day.

When reviewing the three basic night shift patterns the value of the Casino Shift becomes immediately apparent, as this design affords its participants the ability to sleep at some point within the 2:00 AM to 6:00 AM Anchor Period. Research has shown that the Casino Shift preserves more quality sleep and is preferred by a majority of participants. Cognitive impairment is reduced on this shift and work performance is generally improved.

Whenever possible I design labor standards which preserve the Anchor Period for sleep when there are employees in the Job Class who will be working night shifts. While Casino drop schedules can vary from one property to another, I believe that it is the responsibility of analysis to take into account not only the business aspects of labor management but to act in the best interest of employee wellness too.

Take a look at your Property’s night shift designs by Department and note those which allow for the preservation of Anchor Period sleep. Compare your findings to your Departmental Employee Feedback survey results, you may just find there is also a corresponding pattern of enhanced overall employee satisfaction when quality sleep is preserved.

Calculating Short Abandonment

Here is a quick tip on calculating Short Abandonment telephone calls for your VIP / RES / PBX Call Centers:

Short Abandonment = 50% of your Target Service Level + 1 Second

For example, if your call service target is 80% of all calls to be answered in 20 seconds, then the calculation for Short Abandonment would be (20 Seconds X 50%) + 1 Second, or, 11 Seconds. Any calls abandoned that were less than 11 seconds in wait time would be designated as “Short Abandoned” and this total would be subtracted from the reported number of Abandoned Calls for labor analysis purposes.

Of course all Abandoned Calls should be investigated but why subtract Short Abandonment calls when reviewing staff levels? The answer is that because the Abandoned Calls volume indicator is one of the primary testing statistics for staffing in a call center you will want to use a value that is relevant to the planned service level in place. Your Call Centers did not have a reasonable chance to answer these short abandoned calls as they were staffed to a 20 second service level, and, if your staff were actually answering calls in 10 seconds instead of 20 then you would be over-staffed against your stated service goal.

Forecasting Federal Holiday Weekends

A Four-day Federal Holiday Weekend normally represents a tremendous boost in business volume for Casinos. Guest service plans are put to the test and everyone wants to put their best foot forward with a full house watching in order to maximize gaming revenue and employee tipped income. In order to focus the available staff on maximizing profits there should be a solid set of employee schedules based on a comprehensive forecast of daily and hourly guest volumes. And while no advice can be considered hard and fast when it comes to forecasting, here are some tips that may help you become more accurate in predicting how much daily and hourly volume will occur during these very important Friday through Monday holiday time periods:

Divide and Conquer. Separate your daily volume forecast activity from your hourly volume prediction – in most cases you will be more accurate if you to focus on each independently. For example, you should finalize your Saturday forecast of Coin-In independently of how you feel that Saturday volume will be distributed on an hourly basis. Here is a tip – don’t over-analyze your daily volume forecast, pick a representative sample of similar past historical days as a trend reference and then make a call. And remember this bit of advice - always ask for feedback from both Marketing and Operations on Daily volume predictions but rarely ask for assistance on developing forecasts of hourly volume. In the case of hourly volume, Marketing will typically over-estimate the impact of a holiday weekend promotion on hourly volume patterns while Operations will usually give you the worst-case staffing experience they can remember. Neither will help.

Fridays and Saturdays stay closer to Trend. In many cases the actual daily volumes reported for the Friday and Saturday of a holiday weekend will stay very close to recent (non-holiday), trends. Test this theory by reviewing the actual holiday week from prior years with the historical Fridays and Saturday’s leading up to the weekend. Watch for a potential “displacement effect” produced by local Guests moving their normal visitation patterns from one day to another – in the case of Friday and Saturday, if the holiday is more family-centric then some of your higher-frequency Guests may move their normal visitations to earlier in the weekend in order to spend more time at home on Sunday and Monday.

Make the Call on Sundays and Mondays. Here is where the rubber hits the road, for in most cases one of these days will by higher in volume than the other (and both will normally be higher than their recent trends). Remember that on most Federal Weekends either the Sunday or the Monday will be focused on family / religious activities while the other day will be “free” - and that will be the day when the volume increase will really hit. The trick is which day will be high and which low? For the answer look to previous actual volume recorded on the same holiday weekend in prior years, then, review any local event / concert / promotion which could change this year’s daily volume pattern.

Sundays will be like Saturdays (and so on). You have probably heard the old adage that says the Sunday will be like a Saturday and the Monday will be like a Sunday. From an hourly volume percentage this is pretty close to correct – as a starting point. Again, look for area events and activities that could disrupt or displace this pattern, but guest arrival / departure habits usually remain strong and will carry over to holiday Weekends.

Account for Area Events. Federal weekends are noted for large area events and community activities. For example, is there a huge fireworks display in the area? If so, this could reduce the volume during the hours leading up to and during the show, usually family-type events will not produce a big late rush as everyone tends to go home together. Big sporting events (either local or national), may also have an impact on volumes, especially in the area of Table Drop and Poker Rake. Watch for table volumes to lag leading up to and during the event, then brace for a late rush (especially if the home team wins). Remember that Slot volume is usually less impacted by competing sporting events than Table Games / Poker volume.

Finally, don’t forget about the rest of the Holiday Week’s daily forecasting, as in many cases the actual volumes reported for the Tuesday through Thursday time period will be significantly lower than their normal trending, (with Tuesday being the most impacted through Thursday being the least). If you see this trend available then capitalize by reducing the number of employee hours scheduled throughout the balance of week so that any potential overtime expense driven by the big weekend is minimized.