Overtime comes at a high price for businesses. It can often feel like your only option, but overtime doesn’t have to take over your profit margins. Even when demand is high and budgets are low, here are eight easy ways how to reduce overtime.
1. Treat overtime as the exception, not the rule
Company culture starts at the top. If you treat overtime like any other hours worked and just part of doing business, your employees will do the same. Instead, overtime should be treated as the final option, not your first.
Changing your “overtime culture” might be a challenge for the employees who are used to working and receiving overtime pay. But for your business as a whole, a culture of overtime often goes hand-in-hand with a culture of disengagement and employee burnout. If your employees are so accustomed to working longer or clocking out late that it doesn’t even warrant a conversation, it’s time to talk to your team and take a closer look at your organization’s values.
2. Make sure your team has the right equipment and resources
Learning how to reduce overtime is about making the most of normal employee hours—working smarter, not longer. There are a lot of manual and administrative tasks that eat up employee time throughout the day. The average worker spends more than a quarter of their day reading and answering emails alone.
If rote, day-to-day tasks eat up a lot of your team’s time, find ways to automate them or make them easier. Instead of hosting daily meetings, use an online project board where everyone can check the status of the project and their assignments. Project planning tools like Asana are easy to use and often free depending on the size of your team.
Using email automation and customer drip campaigns, you can also instantly respond to customer inquiries instead of sending individual emails one by one or emailing back and forth to find the best time for a customer to meet. There are also many automated employee training and onboarding programs, which can be self-paced and completed more quickly.
The small things add up and can go a long way to reduce overtime. It’s important to make sure your team spends the majority of their time on their actual responsibilities, and that they have the tools they need to do their best work. If your team is spending their shift troubleshooting clunky software or old equipment, it’s time to replace them with something more efficient.
3. Track and identify overtime patterns
Payroll shouldn’t come as a shock. Instead of being unhappily surprised by employee overtime each pay period, get ahead of employee overtime before it starts. Today’s scheduling apps and work management software tools allow employers to set up tracking alerts for employee hours. If an employee hits their maximum for the week or is working over their usual average, knowing early gives you time to adjust schedules.
It’s not just important to track hours worked, but how much overtime employees are earning and how often. Forbes reports that just 21% of employees say they’re highly engaged at work. Chances are, a small group of employees are working the majority of overtime hours.
Go back through your employee payroll and carefully evaluate timecard data. Are there certain times of the year, like during the holidays, where overtime is typically high and unavoidable? Are the same people working more overtime each shift? Then, compare your planned labor budget to your actual labor budget. Is your employee scheduling accurate and match your budget in reality, or does it need some adjusting?
4. Cross-train your employees
A “single point of failure” is part of a system that will bring the entire system to a halt if it stops working. If one employee is the most skilled or has the most experience, they’ll likely be the ones picking up all the slack. They work the most overtime because without them, your business grinds to a halt.
If you notice one employee earning the most overtime or if they’re the only one who can do the job, burnout is already on its way. What would happen if that employee calls out sick? What if they take a vacation, or take a new position and leaves your business?
Spreading out responsibilities and specialties amongst your whole team is another way to reduce overtime. Instead of relying on a single skilled employee, train other team members to step in and pick up the load.
5. Try flexible work schedules to reduce overtime
The best work doesn’t only happen from 9-5. It doesn’t even have to happen in an office. Over half of employees report that if they need to get work done, they would prefer and be more productive doing it from home than at the office.
Research shows over and over that flexible work schedules benefit both employers and employees. Employees with flexible schedules are more productive during the hours they do work and use their time more effectively—reducing the chance of overtime or not getting their work done as scheduled. For employers, allowing employees to telecommute can save around $11,000 per employee each year .
Flexible work scheduling may not work for every business, and not everyone is cut out to work from home. Letting employees experiment with telecommuting or flex time can help reduce overtime.
6. Cap overtime
While overtime pay kicks in for non-exempt employees when they reach 40 hours no matter what , there aren’t any federal limitations on how much overtime your employees can work—or how little. Overtime is an inevitable number on your spreadsheet of labor costs, but it doesn’t have to be an endless cycle. Employers have the power to set how many overtime hours employees are or aren’t allowed to work.
Determine a weekly, monthly, or even annual cap of overtime hours your business can afford to pay per employee. It could be anywhere from two hours a month to 30 hours a year. Try to build in enough room so that if employees need to pitch in and work more overtime they can, but not too much where overtime begins to feel common. Capping overtime ensures that work gets distributed more evenly amongst your team and that everyone has a chance to work overtime hours if they’d appreciate the extra pay.
But remember: non-exempt employees must be paid overtime for any hours worked over 40 in a workweek. Even if you set an official cap on employee overtime hours, if an employee works more than 40 hours in a week, they still must be paid time and a half. Overtime caps should be taken seriously, but don’t disqualify you from paying overtime at all.
7. Match staffing to demand
The endless overtime cycle typically pops up in two scenarios: when demand outweighs labor or when employees are improperly scheduled. Demand can quickly spike during busy seasons and when your business is going through a period of aggressive growth. Increased profits are always great news for business owners—but not if your earnings are going directly to paying employees for overtime and health costs. Working too much overtime isn’t healthy for anyone and leads to high rates of employee burnout and turnover. Which is more-cost effective, hiring a new employee to pitch in a few hours a week as needed, or paying overtime and losing your best employees? If keeping up with demand is the issue, consider hiring some extra help.
But matching staffing to demand doesn’t automatically mean hiring more. Another great way to reduce overtime, is learning how to schedule smarter. Smart scheduling ensures you have the right amount of staff is available when things are busy, and that you aren’t overstaffed when things are slow. Check your workforce management or scheduling software to see how demand and current staffing stack up. Are you paying for too many employees who aren’t needed on the clock? Or are you paying overtime for employees when more staff is needed?
8. Establish an official overtime policy
Finally, it’s time to put everything in writing. An overtime policy should include how you’ll do all of the above—and more. While taking local, state, and federal laws into account, lay out how you plan to compensate for overtime hours. If you use any legal terms in your policy, be sure to define them.
A good overtime policy also includes the new rules or procedures that will help keep overtime under control. Most importantly, decide who approves overtime and how employees should discuss overtime with their manager. Set expectations for both supervisors and individual employees. Communicate how you plan to help everyone abide by new overtime caps or restrictions. Ultimately, your overtime policy should be written to match your business’s needs and set clear boundaries for everyone. If you have any questions about labor laws or writing your overtime policy, it’s always a good idea to speak to a labor law attorney.