Whitesburg KY

Says ‘understaffing’ by ARH may hurt worker satisfaction, quality of service

To the Editor:

In the October 10 edition of The Mountain Eagle, District Two Magistrate Archie Banks said he “doesn’t understand ARH’s logic in paying massive amounts of overtime to nurses just to avoid hiring an adequate labor force.” Mr. Banks went on to say, “It’s more expensive to pay all that overtime than it is to hire enough people.” With all due respect to Mr. Banks, while this argument seems logical on the surface, it simply isn’t true.

In the non-union world, the general rule of thumb concerning employee pay is this: for every $1 a company pays to an employee in regular, non-overtime salary, they pay $1.50, or more, in benefits. These benefits include company-sponsored health insurance plans, life insurance plans, vision/dental coverage, retirement/401k plans, unemployment insurance, etc. So, if an employee earns $10 per hour in salary, the company they’re working for generally has to pay $15 per hour for the benefits package given to that employee. I have never worked in a union situation and I do not know the details of Appalachian Regional Healthcare’s benefits offering to its employees. But I would assume that unionized laborers get comparable (if not better) benefits packages when compared to non-unionized laborers as a result of the collective bargaining process.

It is actually less expensive for a company to pay overtime (generally 1.5 times the regular salary) to a reduced number of employees than it is to pay regular salary plus benefits to more employees. To illustrate this point, consider this example: Let’s say that ARH has 400 hours of labor to be worked in a given week. The company could hire 10 employees, working 40 hours per week (no overtime), to cover the 400 hours. Let’s also say that these 10 employees earn $10 per hour. The total price ARH would pay for these employees would be $4,000 in salary and $6,000 in benefits, for a total of $10,000 for the week.

Now, let’s say that ARH only hires six employees to cover the 400 hours. Those six employees would each have to work their 40 regular hours plus about 27 hours in overtime for the week. At the rate of $10 for each regular hour and $15 for each overtime hour, the company would pay $4,830 in salary to these six employees. In addition, they would pay benefits for six employees, which for the week would total about $3,600. (It is very important to keep in mind that the cost of benefits remains the same regardless of how many hours those six employees work – overtime has no bearing on the overall cost of benefits.) Adding the cost of salary plus the cost of benefits for the week, ARH would pay a total of $8,430 for those six employees, which is $1,570 less than it would have cost had they hired 10 employees.

As you can see in this example, by having fewer employees working longer hours ARH actually reduced its total labor cost by over 15 percent. As ARH CEO Jerry Haynes stated in his letter to Letcher County Judge/ Executive Jim Ward, the Whitesburg ARH employs 323 people and has an annual payroll of $20.2 million. Given those numbers, it appears that the Whitesburg ARH probably saves around $3 million each year through its practice of understaffing, apparently at the expense of employee satisfaction and quality of service to its patients.


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