Managing overtime can be a headache for many companies. There are times when overtime is constant, which can lead to considerable costs for the company. If your company doesn’t find a way to minimize overtime, you can lose a great deal of money which will cut your profits significantly. A single department could pay out thousands of dollars a month in overtime costs. These could be greatly reduced if the company took steps to minimize employee overtime.
You need to handle overtime carefully for a two reasons: there are significant costs to the company and it negatively affects employees.
Significant costs to the company
It’s important to manage overtime for financial reasons. Overtime is costly because you have to pay people time and a half for each hour they work. For example, if you have ten employees who make $13.25 an hour and they work 2 additional hours every day for a week, you know the costs will be significant. It breaks out to an extra $13.25 in addition to hourly wages. After an entire week, you’ll accrue $662.50 in wage costs in addition to the regular wages you already have to pay. If you do this regularly, the costs will add up fast.
Negatively affects employees
While employees might appreciate occasional overtime because of the money, working extra hours places a burden on them both mentally and in day-to-day life. Long hours have an impact on people. They get tired, become less motivated and are more likely to make mistakes. Overtime cuts into time with their families, friends and hobbies. People often feel overwhelmed and bitter if they are constantly forced to work more, especially if they don’t know about it ahead of time.
Some employees rely on the extra money they receive from overtime and might view cuts in overtime as unfair. Unfortunately, constant overtime costs are a bad business model for the company. If you need to have overtime, plan it ahead of time as much as possible. Ask for volunteers so people who need the money have the opportunity to sign up first.
So, how do you go about minimizing or eliminating overtime? The most important thing you can do is analyze why the overtime is occurring. It’s usually a staffing issue. Companies that are growing rapidly often need overtime because they have more work than employees. This means that they need to hire more people. Sometimes, it’s a case of seasonal overtime. At certain times of the year, a company may be extremely busy, such as summertime, the holidays, the beginning of the school year or the tax season. The rest of the year, they only need a bare bones staff. What’s the best way to handle these situations?
If you notice that all of your workers, especially the best ones, are overwhelmed and can’t get their work finished without overtime, you’ve got a staffing problem. You don’t have enough people to get the job done and that means overtime. While some people might appreciate the extra money in the short term, it cuts into their personal lives and they’ll come to resent it. People get exhausted when they don’t have enough time to recharge their batteries. So, what are the solutions?
If your company is growing rapidly, you need to hire quickly. Don’t overdo it on the hiring. You don’t want to hire too many people at once in case your company can’t sustain the growth. If hiring needs are urgent, bring together human resources and managers in different departments to create a strategic plan for hiring for the next three, six, nine and twelve months. If your staffing needs are sporadic, your company should move to a seasonal hiring model. Hire temporarily for short periods of time during your busy seasons. Try to hire temporary workers for the tasks that require the least amount of training.
It’s unlikely that you’ll be able to completely eliminate overtime. Most companies can’t. However, if you plan carefully and collaborate with other departments, there’s a chance you can significantly reduce the amount of overtime in the company. This can save your department and company a lot of money. It will also make life easier for employees.