Managing wage rate increases
This week I would like to discuss how to handle wage rate increases within your PL budget.
With our clients wanting cost reductions and per diem rates that are flat for the upcoming year, it is difficult to handle wage rates for your associates. While some of our contract allow for CPI or something similar, many amounts are on an annual review and zero based budgeting.
Below is a simple process is to truly understand what a 2% increase in hourly wage rates across the board would mean to your PBO.
Assumptions for this example;
1. Account paid hourly payroll each week is $2900.
2. The average hourly wage rate is $9.75.
3. A 2% weekly increase would be $58 ($2900 x 2%).
4. Your paid payroll has been based on 297 worked hours per week.
To offset the total increase of $58 weekly, you could reduce your scheduled hours by approx. 6 hours per week, ($58 divided by $9.75 = 6 hours).
Reducing payroll by 6 hours per week is a very simple way to help offset the 2% increase in payroll. Six hours each week is a great way to improve productivity while still delivering exceptional customer service.
While this is only an example, reducing hours worked is shown in situations where a per diem increase is not realized. However, we always should be on target with our actual payroll needs weekly.
Kevin J Mclaughlin | Regional Director of Operations