5 Things You Should Know About Overtime
April 23, 2019
- Quantity Matters. If your workforce is complaining about overtime, don’t assume that it’s always because there is too much. It may be just the opposite. In most workforces, about 20% of your workforce will avoid all overtime. At the same time, about 20% of your workforce will work all the overtime they can get. The remaining 60% will tolerate what they consider “their fair share.” Find out how much overtime your workforce wants and try to make it available to them, within reason. Too much overtime and you run into fatigue-related issues, even if your workforce wants it. Too little overtime and you lose flexibility to respond to short term labor needs.
- Distribution Matters. Suppose you knew, on average, your workforce wants 8 hours of overtime a week. If you gave everyone 8 hours of overtime a week in response to this knowledge, you will likely find that you made very few people happy. Why? Because not everyone wants the same amount of overtime. You may have a workforce where half want 16 hours of overtime a week and half want none. So, giving 8 hours to everyone meets the needs of no one. The key is to have a process that gets overtime to those that want it without forcing it on those that do. While it’s probably impossible to hit this mark all the time, efforts to do so will be noticed and positively received.
- Cost Does Not Matter. While employees make 50% more money when working overtime, the company actually does not incur an increased cost when they pay this 50%. The reason for this is that straight time and overtime are not “loaded” the same way. When looking at the cost of paying for a straight time hour, one must not only consider the wage, but the additional costs such as medical coverage, payroll taxes, holiday and vacations. Of these extra costs, only payroll taxes apply to overtime. The result is that overtime and straight time probably cost the same (plus or minus 5%). Companies may worry about their overtime costs and try to lower these by hiring more people. They can then see overtime costs drop, but this should be accompanied by a nearly identical increase in straight time costs.
- Lead Time Matters. Resistance to overtime is inversely proportional to how far in advance the overtime is announced and assigned. If the lead time is short, resistance is high. If the lead time is several days or weeks in advance, resistance is low. Actively look for ways to extend the amount of time between the assignment of overtime and when the overtime will actually occur.
- The Schedule Does Not Matter. Overtime quantities depend on two things: (1) How much work there is and (2) How many people you have to do that work. Low staffing equals high overtime and high staffing equals low overtime. The schedule only determines “Where” the overtime will occur. Does it occur before or after a shift? Does it occur on a weekend? Does it occur on a day off? These are the things a schedule determines.
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