AdviceSchedulingWorkforce Management

8 Ways to Reduce Overtime Pay8 min read

By March 5, 2020 March 17th, 2020 No Comments

Overtime Pay: Employees are any company’s greatest asset. But they’re also usually the greatest cost too.

In fact, in some companies, labour costs account for 70% of the total costs.

Effectively managing overtime pay decreases expenditure, helps companies avoid expensive lawsuits, increases employee morale, and keeps the business legally compliant.

The following eight tips will help your company avoid the most common pitfalls, expenses and unwanted surprises.

#1: Make sure you have overtime policies in place

An overtime policy, made clear to employees regularly, will protect the business, and your employees, and should play a part in reducing costs, as long as it’s taken seriously by management.

It should stipulate at minimum the following:

  • How many hours is full time, so that employees know exactly when the clock strikes overtime.
  • Standard hours per week for all categories of employees.
  • Overtime laws. 
  • Overtime not paid for.
  • Regular rate of pay definitions.
  • What is considered extra hours.
  • What is classified as double time.
overtime-policies

#2: Use a scheduling tool

Often, overtime pay can be avoided. For example, when the schedule changes.

Now, let’s be clear: life happens, and it can’t be avoided. When this happens, employees need to swap a shift and their managers most often don’t have the time or tools to find a replacement, resulting in the accrual of too many hours for certain staff.

However, an automated employee scheduling tool provides an effortless way of quickly determining which employees are available, whether their skillset is a match, and how close they are to overtime. This can all be done within seconds, and overtime pay avoided.

excel-timesheet-template-free-download

#3: Be meticulous with resource allocations

To cut down overtime pay, managers need to become good at allocating resources to ensure work quality, while at the same time, factoring in things like constraints and dependencies. For example, if a team member calls in sick, the manager must have the ability to consider how the person’s absence will impact the quality of work.

We already know that change will happen, but maintaining quality depends on how that change is handled and how staff are allocated.

The most effective way to allocate resources is by using the right scheduling software, such as EasyRoster.

Overtime Pay Reports

#4: Use reports to highlight incorrect rostering and attendance

Reports produced by rostering tools are able to keep management on top of things, and can highlight incorrect rostering and attendance with regards to the number and grades of personnel who are scheduled at a site, as well as projected and actual wage costs, overtime, non-productive time, site profitability, and so on.

When management monitors scheduling with a “lessons learned” focus, they will find ways to improve rostering and therefore cut down on unnecessary costs.

#5: Track time to the minute instead of rounding off

If employees manage their own timesheets, how do you know how much time is being rounded up? Rounding up to the closest 15 minute mark can mean overpaying for labour, plus a loss in productivity, and overtime pay costs will be higher.

Rounding up also promotes poor time keeping habits of arriving late, and leaving early and taking slightly longer breaks. It is best to remove the rounding up rule or even better, implement an automated overtime clock solution that records time to the minute and leaves no room for human justification or error.

overtime pay notifications

#6: Automate alerts

A simple way to easily keep on top of overtime pay is for supervisors to receive a daily automated email that provides employee punch in times.

This makes things easier for them to keep on top of things, and if they happen to see that someone is routinely working even a few minutes more than their allocated hours per day, they can take appropriate action.

#7: Encourage cross-training where possible

Reduce overtime pay by training employees to perform tasks for multiple positions.

This will also give management more flexibility to easily re-allocate employees in unexpected situations or when there’s a shortage of labour.

At the same time, cross-training employees gives them more skills, and reduces the dependency on certain staff who are required to work overtime because of their expertise.

However, cross-training may not be so easy from a practical point of view, and may introduce its own set of complexities. The right software accurately records worked hours and pay rates for anyone according to which job they worked.

Employee Cross training

#8: Automate scheduling

Today there is no need to keep scheduling staff manually, and there are many simple and affordable timesheet and scheduling software automation tools.

These tools make it easy to track employee scheduling and hours, and most companies will see an immediate cost reduction in administration, labour expenses and overtime pay, especially when they have a dynamic workforce with many changes in shifts, schedules, and employee hours.

At the end of the day…

It’s altogether possible to cut down on overtime pay. All it takes is some smart strategising, and the adoption of the right technology is essential.

excel-timesheet-template-free-download
Daniel Brits

Daniel Brits

I am the Business Development Manager of a division within Adapt IT that focuses on providing companies who use or require Workforce Management Software to assist them in running their operations as efficiently as possible. I have worked with clients in over 15 countries and have provided training sessions to groups of people for the past 10 years.