Resource Projection Best Practice 6 – The 45 Week Year

There are 52 weeks in a year. So a full-time employee works 52 weeks in a year, right? Wrong![wcm_restrict plans=”25541, 25542, 25653″]

In fact, employers typically pay employees to not work 10 percent or more per year. Consider these common benefits:

• 2 weeks or more of annual paid vacation (US average = 2.6 weeks)
  Source: The Atlanta Journal-Constitution
• 2 weeks (10 days) of paid holidays per year (US average = 2 weeks)
  Source: Bureau of Labor Statistics
• 2 weeks (10 days) of yearly sick leave (US average = 1.6 weeks)
  Source: Compdata Surveys
• 1 week (40 cumulative hours) of professional development training, workshops, and conferences (US average = 1 week)
  Source: American Society for Training and Development

Taken together, these benefits reduce the average employee’s time dedicated to production activities from 52 to 45 weeks per year; a productivity loss of 13.5 percent. This level of effort is further reduced as an employee advances in tenure and is awarded additional weeks of vacation. It is this phenomenon that is critically important to strategic planning.

An Example:

Consider two 100 employee organizations, one with an average employee tenure of 7.5 years and the other an average tenure of 16 years. Each company provides employees with a vacation benefit that increases every five years:

1 – 5 years of service: 2 weeks of vacation annually

6 – 10 years of service: 3 weeks of vacation annually

11 – 15 years of service: 4 weeks of vacation annually

Over 16 years of service: 5 weeks of vacation annually

The first company, with an average employee tenure of 7.5 years expects to pay out 300 person-weeks of vacation benefit annually. The second company, with an average employee tenure of 16 years expects to pay employees a total of 500 person-weeks vacation annually; 200 person-weeks of vacation benefit more than the first company. To compensate for this added loss in employee availability, the second company will have to hire five additional full-time employees. Assuming these employees receive a total (salary and benefits) annual compensation of $100,000, the second company realizes a workforce liability of $500,000 more than that of the first company.

Planning Implications

The impact of accrued vacation benefits is significant; reducing capacity without effecting costs. Subsequently, planners must understand the potential for and impact of upcoming changes in vacation benefits in order to adequately prepare their organizations for this impending challenge.

Strategic Resource Planning

Strategic resource planning is performed at an organizational level. These planners must understand the aggregate changes to the organization’s overall vacation benefit payout so they can:

• identify aggregate personnel resource shortfalls
• adjust the company’s projected work capacity based on those shortfalls

and develop a strategic plan that accounts for the capacity loss with one or a combination of the following:

• projects to be eliminated
• product and/or service offerings to be reduced
• staffing increase and the associated expansion in the human resources budget
• additional overtime to be paid and the accompanying human resources budget increase

Project Resource Planning

Project resource planning occurs at a tactical level where a vacation benefit change for even one team member can drastically impact the ability of the project team to achieve its timetable. Therefore, project managers must be aware of changes to the amount of vacation awarded individual team members and then work with each individual to schedule vacation at times that are both convenient to the individual and practical for the project.

Production Resource Planning

Production resource planning also occurs at the tactical level. Unlike project planning, however, some production facilities cannot be shutdown for periods of time to afford mass vacations like those that occur around holidays. Managing time off for production workers, therefore, often has associated with it rules governing the number of persons allowed to be on vacation at any one time. These policies ensure that a minimum number of critical staff is always on duty thereby ensuring continued production.

Regardless of the planning mode, it is important to properly characterize the availability of personnel resources and to recognize changes over time. When estimating the number of individuals needed to provide a service, complete a project, or work an assembly line, planners must consider the employees’ effective work weeks, not the number of weeks in a year. Not doing so will lead to under staffing, in turn resulting in overtime, cost overruns, and potentially employee dissatisfaction and attrition. While using employee and organizational data is best, absent quantified information planners should consider the 45 week year as the standard for employee availability.[/wcm_restrict][wcm_nonmember plans=”25541, 25541, 25653″]

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