Is overtime costing your business money? You’re not alone. Unnecessary overtime hours are a bad habit that can wreak havoc on your bottom line and your employees’ productivity.
Sometimes overtime is needed – in preparation for big orders or events, for example – and can be given appropriately with no negative consequences. Issues arise when overtime is treated as an easy option instead of a last resort.
Not only is unnecessary overtime bad for an organization fiscally, it can also be detrimental to your employees long-term productivity and health. Employees who work more hours are at a progressively higher risk of developing cardiovascular disease, starting at just 46 hours worked each week. Productivity takes a hit when overtime is viewed as a guarantee regardless of work load, resulting in increased idle time during the work day to get access to overtime pay.
Eliminating unnecessary overtime is critical to elevating your organization and becoming more productive and efficient. Below, we share our top five tips to overcoming the urge to overcompensate, overstaff, and overpay, and eliminate unnecessary overtime for good.
#1: Evaluate Staffing Needs
There’s a chance you do actually need overtime and the most likely cause of that is under-staffing. Take a holistic look at your entire organization’s staffing model – are there departments that consistently need overtime? Why is that? You may find that there are seasonal correlations with overtime spikes, which could be cause for hiring part-time seasonal help or evaluating whether too many employees are taking vacation at the same time. Every workplace is unique and addressing whether understaffing is the cause of overtime spikes can determine what your organization’s next steps should be.
#2: Reduce Idle Time
Idle time is defined as time where your employees are not actively working. In a culture where overtime appears unlimited and guaranteed, idle time can increase and employees strive to collect overtime pay. Idle time is nearly 16 times more expensive than overtime, and can be caused by overstaffing or underutilizing employees. Cracking down on overtime can help reduce idle time naturally, but special attention should be given to employee deadlines and areas where idle time frequently becomes a habit.
#3: Consider Cross-Training
Overtime can also become a frequent occurrence due to employees with skill sets that are too narrow. For example, when operations get busy in one area handled by only one employee, that employee can end up working overtime due to the fact no one else understands how to perform their specific duties. Identifying underutilized employees (perhaps those flagged for idle time) and training them on these in-demand skills can help alleviate the need for overtime, simply because all employees are capable of taking on a variety of roles. From there, keep track of these upskill opportunities and victories, so next time there’s a space to fill, you can fill it quickly and cost-effectively.
#4: Streamline Your Timekeeping
You can’t eliminate unnecessary overtime if you don’t know about it. An efficient, streamlined timekeeping solution will help you accurately align hours and scheduling demands to ensure you have the correct staffing to meet real-time demand. A HCM software solution like Arete’s allows you to gain insight in scheduling and workforce utilization, while reducing the time needed for managers and supervisors to create and communicate schedules. Using a robust time and labor software solution gives your organization real-time visibility into scheduling data and empowers you to build, manage, and measure schedules that meet output demands without overspending on labor.
#5: Revisit Your Overtime Policy
Overtime isn’t always unnecessary. When big projects or events come up, it can be beneficial to provide overtime to ensure work stays on track. Being prepared for these instances starts with a strong overtime policy. Establish a cap on overtime hours and stick to it to help prevent employee burnout. The policy should also establish a procedure for requesting or tracking overtime, as well as any necessary approvals for overtime work.
At the end of the day, you can’t accurately address overtime issues until you know they exist and how severe they are. By implementing these tips and understanding the scenarios where overtime arises, you can better prepare for those situations and save your employees some stress (and save your bottom line).
Looking for more information on reducing overtime? Download our fact sheet.