One of the reasons for having a review of shift working is when an organisation is paying out a lot for overtime. This is usually because they are understaffed, or the staffing is not arranged to fit in with the work. For instance, there can be an 8hr 3-shift system in place, operating Sunday Night to Friday evening, but the work is dependent on orders that build up through the week. Hence, on paper, there might be enough staffing, but it is not aligned with the work and this results in weekend working, at overtime rates to finish each week's workload.
Other causes might be absences during the week, or holidays, all of which have a cumulative effect requiring weekend working to make up the time.
If we were to advise on a shift pattern review, we would strongly advise that your aim is to rectify the problem and reduce, or eliminate, weekend overtime working. However it is often the case that the overtime is seen by the staff as part of their basic earnings and resist any changes unless they are compensated for the loss of earnings. The problem is; how much compensation and how much will it cost? Whether compensation should be paid at all is for another time, this article is about calculating the compensation, not the principle.
When asked the question; how much did you earn? It is an amazing fact, but in our experience no one knows how much they earned or will earn. Don’t forget, this is about compensation for ‘loss of earnings’ so the first thing we need to do is establish what this loss is. They have a vague idea, of course, and it is usually on the very high side of their actual earnings. A typical method is to take their current earnings and add a very good year of overtime earnings. When analysed the reality is somewhat different .
Compensation often takes the form of using the average earnings over the last 3 calendar years and comparing that with anticipated earnings in the future. If we were to take just one year, there could be vast differences between individuals and circumstances, such as a recent ban on overtime or the processing of a large unexpected order. Analysis over 3 years will balance out most anomalies. Inflation will also have a cumulative effect, and this will also occur in the future. Consider basic earnings of £20,000 this year and 2.5% inflation increases in each of the last 3 years and in the future. Then, 3 years ago, the basic earnings would have been £18,571 and in 2 years time will be £21,012, a difference of £2,441. This is equivalent to 13% of £18,571. Thus their ‘loss of earnings’ in 2 years time would need to be greater than £2,441 to receive any compensation. Put another way, if 3 years ago they earned less than £21,012 then in 2 years time they will not have any loss or earnings. We can take the last 3 years of earnings, compare them with anticipated future earnings and calculate at what point in the future the normal increase in pay will exceed their past earnings causing there to be no net loss of earnings. It is also unusual to eliminate overtime altogether and thus an element of the future earnings will be overtime and this needs to be taken into account. We usually do a statistical analysis of future overtime that will be needed to offset any compensation.
Being more efficient and correctly coping with the workload without overtime means that there will be annual savings which will more than cover the cost of any compensation payout.
If you would like any help in reviewing your shift pattern or calculating loss of earnings please