Small amounts add up to big savings
Timesheets and invoices reveal opportunities
When the money is flowing you don't always look closely at what you spend," admits Mary Haynor, president and chief executive officer of Horizon Home Care & Hospice in Brown Deer, WI, an agency that cut $1.3 million out of the annual budget in early 2010. "It is hard, time-consuming work to evaluate all of your costs but when you do, you see how the little things add up," she admits.
"I looked at every one of our 560 employees' timesheets," says Haynor. "It was enlightening." She found employees receiving on-call pay who were never called and office employee overtime pay that steadily crept up over the years. "We eliminated on-call pay for the employees we don't call and we set a policy that we don't pay overtime for our office staff," she says. "It was amazing that we eliminated overtime and the work is still getting done."
One of the more creative strategies to control employee costs was to adjust the benefit guidelines for part-time employees. "We have always offered full benefits to part-time workers who are at a least ½ of a full-time employee position," she says. "But, 2 part-time employees cost more in benefits, taxes, and paid time off than 1 full-time employee so we had to find an incentive for our part-time employees to work more hours," she says. Now, an employee must work 7/10ths of a full-time schedule to qualify for benefits. "We not only needed to control benefit costs, but we really needed them to work more hours so we did not have to hire more full-time employees to cover the increasing number of patients we were seeing," she adds. She estimates that the increase in part-time employees hours worked translated to 10 fewer clinicians that the agency needed to hire. She says, "This worked out to be a win-win for employees and the agency."
Benefit levels for all employees were evaluated and the agency discovered that it was paying more than the market for extended illness, says Haynor. "The market pays 66 2/3% of salary for extended illness and we were paying 80%," she says. The benefit was adjusted to reflect the market standard, she says.
Another bold step Haynor's agency has taken is to announce that annual pay raises will be held until the agency exceeds budget projections, says Haynor. "No one was thrilled to hear this decision but we've explained the challenges we're facing and people understand," she says. "The whole process has made employees more aware of costs and we get suggestions from them for more cost savings."
To get a handle on every expense of the agency while they were identifying potential cost savings, Haynor set a policy that all invoices had to be co-signed by her. "I literally looked at everything we spent," she says. Having an extra pair of eyes looking at each invoice that was automatically signed for many years led to some cost savings no one might have considered, she says. "In our employee kitchen we always provided plastic forks, spoons, and knives for employees to use as they ate their meals," she says. "We were spending $1,000 on items that employees now bring with their lunches from home. It isn't a huge amount but reducing these small, unnecessary expenses can add up."