Overtime: A Grab-Bag of Information
July 16, 2014
I am an overtime expert. I have worked with companies around the world for more than 25 years helping them address staffing and scheduling issues, most of which have some level of overtime as a component of the overall situation.
My last blog post was about overtime and it generated a lot of discussion; especially on Linkedin. At a glance, one might think that everyone was stating their opinion about an issue and thus, might be disagreeing with someone else who had a different opinion. In truth, I think nearly everyone was right. They all just had different perspectives. I thought I would try to put all of these issues into a single blog along with my own perspective. Wish me luck...
- An hour of straight time (fully loaded) costs a company about the same as an hour of overtime paid at the rate of time and one-half.
- About 20% of people love overtime. About 20% of people hate overtime. About 60% of people will work their "fair share".
- When it comes to overtime, the "marginal propensity to save" is always less than one (1). What this means is that people don't same 100% of their overtime income. This also means that they up their standard of living when they spend overtime income (even if this means they only bought an extra candy bar).
- As people adjust their standard of living, they become "addicted" to the overtime.
- Consistent high levels of overtime extending beyond 6 months in a row will result in "Golden Handcuffs." This is a phenomena where people will complain about too much overtime ruining their family lives AND complain if overtime hours are cut because they can no longer afford to make a car or house payment.
- Overtime at union sites is a particularly tough problem. Senior employees get the prime overtime during the week and the junior employees end up working the undesirable weekend overtime The result is high turnover of new employees who tire from never having a day off. I typically recommend that senior people get first shot at overtime up to a certain level (56-60 hours in a week) before they go to the bottom of the volunteer list. I also typically recommend that junior employees are the first to be forced to work overtime up to a certain level (56 -60 hours in a week) before they go to the bottom of the forced list. This recognizes seniority while keeping people from "voluntarily" working themselves to death while, at the same time, giving the junior people time off to recuperate every week.
- If you workload is flat (does not change by week, or month or season) then a good target for overtime is between 5% and 15%.
- If your workload is highly variable, the optimal level of overtime (considering both cost and fatigue) may be much higher than 15%.
- Too much overtime is less of a problem than too many days of work in a row. We short ourselves sleep on days we work. The more days in a row we work, the farther we fall behind in our sleep. We need days off to catch up on our sleep. In other words, its better to work four 12-hour shifts in a week than to work six 8-hour shifts. Both have 48 hours but the 12's have 3 times as many days off for recovery.
- If a machine paces the work, then moderate levels of overtime will not have an impact on productivity.
- If people determine the pace of work, more overtime will cause the people to slow down, even if it is unintentional.
- Overtime at high levels will cause drops in productivity, safety, quality and retention.
- When assigning overtime, do so as far in advance as possible to minimize the disruption to the plans your workforce may make outside of the work environment.
- If your overtime level is zero, you are not "perfectly" staffed. You are over-staffed.
- The accident rate per hour should be expected to go up between the 12th and the 14th hour worked in a day.
- Overtime does not make people sleepy. Lack of sleep makes people sleepy. Circadian rhythms also play a role in alertness.
- Overtime allows a company to compete for labor with other companies that may pay higher hourly rates but offer very low overtime amounts.
- When people work outside of their normal schedule, pay them a premium. They are helping you on time that was originally considered to be their own.
- Straight time is typically purchased in 40 hour/week increments when you hire someone.
- Overtime hours can be purchased in any quantity you wish. Even though it costs the same as straight time, you are actually getting a fully qualified person as opposed to hiring and training someone to provide more hours.
- All employees want overtime when they want it and they don't want it when they don't want it. Go figure.
I welcome your questions and feedback. If you disagree with me, first ask yourself, "Is my perspective different from the one Jim was using when he wrote these?" I say this because I can easily find unique situations where each of the above is not true.
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