premium pay top tips
FLEXIBLE WORKFORCE
In hospitals, premium pay is defined as any rate of pay in excess of the base employed rate. This takes many forms including differentials, overtime, and contract labor. Premium pay is designed as an incentive to level-set shifts and ensure we have the right staff in the right place at the right time. As labor spend constitutes more than 50% of all expenses, unmanaged premium pay can become a problem large enough to put a hospital out of business. While premium pay plays a critical role in our country’s hospitals, some premium pay is avoidable. In this series, we’ll clearly delineate which types of premium pay are critical to operations and which can be avoided.
CONTRACT LABOR
When we hear premium pay, we almost always think of contract labor. In some organizations, contract labor is considered a “dirty word”. However, when appropriately used, it can be significantly more cost effective than other premiums staffing resources. High performing organizations categorize their contract labor utilization and create targeted action plans when addressing inappropriate uses. In this series, we’ll dive further into these scenarios and our recommended actions to address these.
FILLING VACANCIES
If you answered yes to this question, what other strategies have you implemented to fill vacancies?
Some recommendations that come to mind include:
* Investing in new graduate nursing programs to create an employee pipeline
* Incorporating hire ahead into your position approval process to stay ahead of staff turnover
* Evaluating the controllable aspects of the hiring process to decrease fill timeline
Haven’t selected hire targets at your hospital? In our next series, we’ll explore how to select targets that optimize labor spend, taking into consideration each department’s ability to flex and the cost of premium labor.
PRODUCTIVITY
Missing a productivity target is painful to your bottom line, but missing a target using premium dollars is especially damaging. When not managed properly, this can balloon into a large budget miss to the bottom line.
AVOIDABLE OVERTIME
Identifying avoidable overtime (OT) and shift differential abuse is another top expense strategy that can provide timely bottom line relief. The first step is to establish categories for OT utilization and begin regular reporting by category. The table below is an example of categories that can be reviewed for appropriate utilization.