In the world of physical security, the core mission and goal of any security guard firm owner is to provide the highest level of safety and security for clients, employees, and the community. Security guard firms need to ensure that business operations thrive with minimal costs and sustainable profit margins while justifying the expense security teams incur for essentially performing their duties.
As the major cost for security guard firms are people – the numbers running upwards of 95% – there is an extremely tight margin for profit, often dependent on a few percentage points. The biggest challenge that can impact these margins is often one that guard firms cannot immediately see, which is unbilled overtime. This can create as much as a 6-10% impact on profits – and most firms don’t know how to identify and prevent it. As a security guard firm owner, it’s your job to identify these potentially sky-rocketing costs and to find ways in which you can prevent non-billable overtime.
What is Non-Billable Overtime?
First things first; the logistics of managing security personnel labor costs. When a workforce consists of hourly employees, they are being paid a set hourly rate based on location or type of post. Most hourly workers have a weekly limit of hours – usually 40 hours per week. If an employee goes over those 40 hours, they incur overtime pay, which is set at time and one-half. So an employee making $15/hour during their regular pay period will earn an additional $7.50/hour once they go over 40 hours, or $22.50/hour.
Here’s the catch that plagues security guard firms – most of the time, you cannot bill more to the client for overtime pay. As most bill rates are fixed within a contract, they cannot be adjusted based on overtime.
So, if your contract says that you can bill at $22.00/hour for your officers, and you incur overtime pay for that officer, you are actually losing $0.50/hour when you have officers working overtime. This is considered “non-billable overtime”; and if you don’t have visibility into this, and continue to allow overtime to be incurred, it can impact profit margins, take away more money from revenue, and potentially make it difficult for security guard firms to maintain profit.
Here are a few tips that you can implement to reduce or even eliminate non-billable overtime:
1. Visualizing Security Personnel Schedules with Time and Labor Management
Many security guard firms have different ways of visualizing and communicating the schedule to the workforce. When security guard firms are starting out, or have a small workforce with handful of clients, they can keep it simple; believe it or not, some still use white boards and printouts to give to the officers. As they mature in their operations, they may upgrade to a spreadsheet or a digital format; but as they grow, the level of visibility into each officer’s weekly hours can become blurry.
In order for security guard firms to have real visibility and control over the cost for time worked, implementing and managing an employee scheduling software solution is key to success. Visual Scheduling tools not only act as a digital schedule board for the different locations, posts, shifts, and even clients, but they have the ability to show the total hours per employee, per post, per client, and can give security guard firm owners a better idea of the total hours incurred.
2. Using Intelligent Employee Scheduling Solutions to filter out Non-Billable Overtime
Having a visual scheduling solution will give insight into where security personnel is most prevalent, where they are posted for shifts, on a weekly basis. In order to prevent non-billable overtime, security mangers need notifications for when security personnel are approaching their max hours for the week, ensuring no additional expense is incurred.
A comprehensive time and labor management software solution will have business rules that allow for security managers to see which officers are approaching their weekly regular hour limit. Security managers can then filter out these officers when assigning shifts. In example, if security managers are scheduling personnel for a Friday post, and they know it’s imperative to prevent overtime, the security manager can filter out any officers that are over 32 hours, essentially eliminating overtime as a factor.
3. Gaining Insights of Predictable Schedules With Reporting and Forecasting
Getting a snapshot of security personnel performance is important for you, as the security guard firm owner, since it’s essential to see what your profit margins are for a point in time; yet to really improve the reduction of labor costs due to overtime, there needs to be a broader report on an extended, rolling period. By looking at a Rolling Revenue report, you can look back at past weeks to see the fluctuations in hours, billable charges, and expenses. This report should ideally contain:
- Billed versus Unbilled Hours: For an extended period, how much did our billed versus nonbillable time change?
- Revenue versus Expenses: Extending the period allows you to see how the billable revenue and expenses have changed over time.
- Gross Payroll Profit: How much was made during the time period, and were there any changes or fluctuations on the profit?
- Cost per Billed Hours: The Billed rate versus the Payroll rate and what is the margin from a per hour basis?
Reports such as this one is valuable in helping security guard firm owners forecast potential profit over time. A Rolling Revenue report allows for insights into billable revenue and labor expenses, in order to see whether there is a trend over that period. Viewing these peaks and valleys can effectively help security guard firm owners plan out the profit for the next period.
At the End of the day, to eliminate or reduce overtime depends on if it’s an avoidable expense.
While these are just some options for reducing non-billable overtime, there are times when there simply is no other choice but to have security personnel work overtime hours. High volume periods, or unforeseen demands from additional work or new contracts come in and makes it difficult to keep up.
Although using Time and Labor Management solutions will certainly give you the insights on where to reduce overtime, it may not eliminate it completely. Having visibility into where, and how often, overtime is incurred while planning on its future reduction can really benefit an organization. There are calculations that you can use to help determine how much overtime can be reduced, but ultimately it will always depend on how operations are handled, the tools leveraged to help, and on the reporting used to forecast potential expenses.
Are you a security company who’s interested in calculating your ROI to reduce overtime and hourly expenses? Or are you interested in learning more on how a using a workforce management tool for your security teams can reduce costs? Fill out the form to request more information or to learn more about how to efficiently manage your operations.
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