The security guard services industry relies on ensuring that they are committing to the hours, credentials and locations which are needed by their clients. This is essential to delivering a quality service – staff that will arrive on time, properly trained and dressed to deliver the service. However, over 85% of client agreements do not allow for the payment of overtime, and any overtime incurred by guards is considered non-billable overtime (NBOT). Given today’s labor shortage and labor laws (e.g., Obamacare, increased minimum wage, FMLA, etc.), the NBOT rate has increased by over 35%. And with a remote workforce, it is a constant challenge to get real-time data on your staff.

Since you committed to a wage rate and level of service to your clients, these overtime charges are often costs that the security officer firm has to absorb. This can be a major difference in profitability for an organization that is running lean.

Reasons for Incurring Non-Billable Overtime (NBOT)

1.  Visibility: In a sense, you cannot measure what you cannot see. Without proper visibility into the schedule and visibility into time and labor within the schedule, companies simply don’t know when they incur NBOT. Many organizations utilize more manual methods for their scheduling – spreadsheets, written on white boards or posted manually. When you can’t visualize the schedule and tie this information on the hours already worked, a full roster of your staff, or connect the wage rates to your schedule, this can be a complex exercise to determine who to post.
2. Resources: Turnover in the industry averages about 110%, and when you have a high rate of turnover, you sometimes have a lack of resources to dedicate to your posts. When you are faced with a post you have to fill, and the only available (or visible) resource is already over hours for that week, you may find yourself forced to incur NBOT in order to honor your contract to your client. The last thing you want to do is compromise and put unqualified staff on the posts, but many are forced into that position, which not only is a disservice to the client, but also puts you at a risk of noncompliance.
3. Qualifications: Sometimes, you have posts that require a specific set of qualifications, licenses or training to fulfill the criteria for that post. Again, without visibility into those qualifications within the staff, you run the risk of selecting a security officer that you know meets those criteria – even if they are over hours for the week. There may be other qualified guards within your team, but without having a top-down view, you just have to fill with what you know.

The Impact Non-Billable Overtime Can Have on Your Business – an Example

The challenge of non-billable overtime can be far reaching, especially when you think about the need to remain lean and efficient on cost, with tight profit margins. In a fluid business such as Guard Services, any NBOT can have a real impact on the business. In many cases, most companies don’t even know how to quantify their NBOT; which makes this a “black hole cost” that can create complications when trying to streamline operations.

To illustrate the point, let’s take a scenario on a potential cost of NBOT:

Let’s take a firm with 100 guards, who we pay $9/hr and work 32 hours per week, or a combined 12,800 hours per month (100 guards x 32 hours x 4 weeks). In addition, there are other costs associated with your labor, such as taxes, administrative costs, uniforms and other employee-related costs. This also needs to be factored into the overall labor cost.

So, your total costs are $134,784 per month for our team. You bill at a higher rate ($14/hour), so our billing looks like:

This leaves us with about $44,000 in profit for the month.

Now – let’s say we have incurred some overtime, for the reasons we stated before. Most companies will range in NBOT rates as much as 7 - 11% over what they pay for scheduled hours. Let’s assume 9%, and the fact that we have a 1.5x Overtime rate:

So, in this example, while we think we have a gross profit of $44,000, we must take out $5,184 of that profit to pay for overtime we cannot bill. That’s about 12% of our profit lost simply because we have no visibility into scheduling. Over time, this can compound over time, and without any visibility to assess and eliminate the Non-billable Overtime, companies lose money without even realizing it.

When you implement an HCM solution that helps to create the visibility into factors such as overtime, you can really help impact that number. Average firms that leverage systems can reduce their NBOT by 38% or more, which equates to $2,000 a month of profit added back on in the above case.

How to Gain Visibility into Non-Billable Overtime

The key here is to have a solution that will not only manage the schedule for the workforce, but will also match this against the time and labor to ensure that you have available guards that have the hours, the skills, and the ability to provide these critical services. By giving the scheduler the power to see billing and payroll, as well as having visibility into qualification for each post, you can select the most qualified person at the best rate to maximize profit. What’s more – with a labor force that is out in the field every hour of every day, this information needs to come to you in real-time, so you can make better decisions – faster.