12
productivity strategies LAB MANAGEMENT TODAY
Plan I: Based on labor savings
Step 1: Calculate the labor-to-sales ratios for
first and second quarters by dividing labor costs
by total sales. Labor costs should include all costs
associated with all technical personnel who case
plan, consult with doctors and fabricate cases; for
example, direct wages (payroll), payroll taxes, subcontract labor, Worker’s Compensation insurance,
group insurance, employee welfare benefits, productivity bonuses, education and 401(k) match.
In the following scenario, labor costs have
decreased in the second quarter due to a combination of reduced remakes, controlled overtime,
greater productivity, sales of higher profitability
restorations, etc. While it’s possible over time to
reach an optimal labor-to-sales ratio that for all
intents and purposes cannot be reduced any
further with the current level of personnel, the
reality is that labor-to-sales ratio tends to be in
a constant flux due to changes in wages, cost of
benefits, overtime, hiring additional personnel,
outsourcing, etc.
Month
Labor Cost
Net Sales
Labor-to-Sales Ratio
January
$109,038.00
$187,704.00
58.10%
February
$91,336.00
$226,532.00
40.30%
March
$89,695.00
$189,965.00
47.20%
$290,069.00
$604,201.00
48.00%
April
$95,124.00
$218,697.00
43.50%
May
$90,884.00
$230,149.00
39.50%
June
$90,873.00
$189,140.00
48.00%
$276.881.00
$637,986.00
43.40%
1 Quarter Totals:
st
2 Quarter Totals:
nd
Step 2: Calculate the labor saving percentage in the second quarter:
Labor-to-sales ratio for 1st Q 2009
48.00%
Labor-to-sales ratio for 2nd Q 2009
- 43.40%
Total labor savings percentage:
= 4.60%
Step 3: To calculate the dollars available for productivity bonuses, use these calculations:
2nd Q net sales x Labor savings % = Labor $ saved
$637,986.00 x
4.6%
= $29,347.36
Labor $ saved - Cost of 2nd Q remakes = $ available for 2nd Q productivity bonuses
$29,347.36
-$16,253.54 = $13,093.82
(based on a 2.5% remake factor)
Step 4: To allocate these $13,093.82 bonus dollars (adjusted to exclude independent contractors and principal shareholders):
% of total payroll the employee’s salary represents x $ available for productivity bonuses = Bonus for 2nd Q
For Gene, for example: 3.1%
x
$13,093.82
=$405.91
Hourly
Wage
Annual
Wages *
% of
Payroll
Clark
$12.00
$17.75
$14.30
$21.00
$13.25
$24,960.00
$36,920.00
$29,744.00
$43,680.00
$27,560.00
3.10%
4.60%
3.70%
5.40%
3.40%
$405.91
$602.31
$484.47
$707.07
$445.19
Heidi
$18.50
$38,480.00
4.80%
$628.50
Jared
$11.75
$22.00
$15.20
$30.00
$19.60
$23.80
$15.90
$17.60
$20.75
$35.00
$16.45
$13.85
$17.35
$13.90
$15.95
$24,440.00
$45,760.00
$31,616.00
$62,400.00
$40,768.00
$49,504.00
$33,072.00
$36,608.00
$43,160.00
$72,800.00
$34,216.00
$28,808.00
$36,088.00
$28,912.00
$33,176.00
3.00%
5.70%
3.90%
7.80%
5.10%
6.20%
4.10%
4.60%
5.40%
9.10%
4.30%
3.60%
4.50%
3.60%
4.10%
$392.81
$746.35
$510.66
$1,021.32
$667.78
$811.82
$536.85
$602.31
$707.07
$1,191.54
$563.03
$471.38
$589.22
$471.38
$536.85
Employee
Gene
James
Pam
lmtcommunications.com | april 2009
David
Ralph
Debra
Deidre
Taylor
Nate
Harry
Scott
Nick
Oskar
Lois
Matt
Bruce
Ric
Keith
TOTAL:
$802,672.00
100.00%
2nd Quarter
Bonus Dollars
$13,093.82
* Based on 40-hour workweek with no overtime
apr_09-15_pip_v3.indd 12
4/1/2009 12:13:10 PM
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