4 Ways to Keep Overtime Costs Down from 4 Great Men in History
13th October 2020
For his Labour Day speech on September 7, 1903, President Theodore Roosevelt said: “Far and away the best prize that life offers is the chance to work hard at work worth doing.”
A powerful statement, yet something is missing:
Although most of us want to do work that we find meaningful, just as importantly, we all want to get paid fairly for our work.
Recently, a new overtime law was passed by the US government that will make it easier for more employees to do just that—to earn more money from their hard work. When the law takes effect on January 1, 2020, an additional 1.3 million workers will be eligible for overtime pay.
Good news? To some extent, yes. Again, there’s no disputing that workers should be paid fairly for their work. However, overtime can also present challenges for businesses and employees alike. How?
Overtime Costs Businesses Money and Productivity
Ideally, labour costs shouldn’t exceed 30% of a company’s revenue. However, in industries where overtime is rampant such as retail, construction, and manufacturing, this could easily go to upwards of 50%.
Money isn’t the only issue when it comes to excessive overtime. It also decreases workplace productivity. It’s the law of attrition at work. According to studies, on average, a 10% increase in overtime hours result in a 2.4% decline in productivity. It also triggers other events that bring down office productivity such as:
- High absenteeism
- Low employee morale
- Poor employee health
- Low focus due to home life conflicts
- Increased workplace safety risks
Managing overtime and keeping labour costs in check should be a priority among business leaders, project managers, and HR professionals.
Since we started with Theodore Roosevelt, let’s continue with this theme and explore 4 insights on how to keep overtime costs down, inspired by other great men in history:
1. “It’s not enough to be busy, so are the ants. The question is, what are we busy about?” – Henry David Thoreau
“There’s not enough time in a day” is a common phrase we hear employees say. They work long hours, but ironically, their to-do lists keep growing. Incidentally, a number of surveys have revealed that the same busy employees who feel they’re always in a losing race against the clock are not accurately tracking how they’re spending time at work.
For instance, one survey revealed that in a company with 15 employees, 735.5 work hours per year are not tracked. This includes 350 hours spent reading emails, 213 hours spent in meetings, and 172.5 hours completely unaccounted for.
It’s important to note that two of the tasks mentioned in the study (reading emails and attending meetings) are the biggest productivity leaks in the office. These non-essential tasks become a bigger problem if employees, project managers, and business leaders are not tracking how much time is wasted on them.
Efficient, accurate, and automated time tracking is crucial in keeping down unnecessary overtime costs. It allows you to minimize the time spent on unnecessary activities and makes employees more accountable in managing their own time.
2. “Let our advance worrying become advance thinking and planning.” – Winston Churchill
In many instances, excessive overtime work is indicative of an understaffed workplace. If your employees are constantly spending extra hours in the office to meet deadlines and quotas, then you’re either understaffed or you’ve set unrealistic targets. Either way, it all boils down to proper planning and forecasting.
Keep in mind that overtime wages are 1.5 times the regular hourly rate of your employees. You could be spending less if you bring in more people instead of paying for overtime. You’re also protecting your workplace’s productivity by preventing employee burnout. Consider hiring project-based employees to help carry the workload during peak seasons.
The key is to have a strong sense of foresight and plan in advance.
3. “The only skill that will be important in the 21st century is the skill of learning new skills.” – Peter Drucker
One overlooked strategy for minimizing overtime costs is cross-training employees to expand their skill sets. As an alternative to hiring more employees, you can give your staff stretch assignments to help out departments that are experiencing a high volume of work.
There are several advantages to doing this. One, you can provide immediate temporary manpower to overworked departments. This is also more cost-effective since hiring new talent is more expensive than tapping into your existing talent pool. Skills training also enhances employee engagement.
When cross-training employees, make sure that you’re training them for skills that are related to their current roles. For example, you can train your sales staff to do marketing or your human resources team to learn customer service. This way, they can also apply whatever new skills they acquire to their current roles.
4. “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” – Abraham Lincoln
In the same way that a lumberjack can’t effectively chop down trees without a sharp axe, your employees won’t be able to do their jobs efficiently without the proper tools. When Oracle asked employees whether they have the most recent tools in the workplace, 56% said they don’t. This means tasks take longer to get done, creating an unnecessary need for employees to extend their workday.
Employees are experiencing a disconnect when this happens. In their personal lives, they invest in the most recent tech to make their day-to-day living more convenient. Then they get to work and are forced to make do with antiquated tools.
Investing in new tools would be more beneficial for your business in the long term, not just in terms of minimizing overtime costs, but for your workplace’s overall productivity.
A Word to the Wise: Keep Overtime Costs Down
Excessive overtime doesn’t only take a toll on your business’s finances. It also takes a toll on employee morale and productivity. Use overtime as a last resort only when necessary. Otherwise, take the words of the great men above and use them to inspire efforts to minimize and manage overtime in your workplace.