If employees are consistently working overtime, so that overtime levels can be considered high, plus the absence rate in the company is low, then your business is suffering from two possible issues:
You don’t have a large enough staff to meet demand, or
Your existing staff is not productive enough.
Let’s check out what else your business needs to know about overtime:
What constitutes overtime?
It’s important for businesses to be familiar with their country’s overtime laws (consult this in-depth guide by country for more info), but generally speaking, overtime is defined as the hours worked by an employee that exceed their normal hours of work, be that daily, weekly or monthly.
As an example, if an employee’s contract states that they must work 45 hours per week, then all hours worked over and above those normal working hours are regarded as overtime.
We written a great article about how to calculate time and a half
Advantages of working overtime
- Obviously, there’s a need for overtime if the business is prepared to pay for it. However, there are good and bad reasons for it. Bad reasons for overtime pay would include employees not getting all their work done during normal working hours because they are wasting time during normal hours. Good reasons would be that there is a special need and it can only be fulfilled after normal working hours, such as bottlenecks, or busy periods, or staff shortages.
- When disruption to services or other workloads can’t be avoided.
- Carrying out work that can’t be done during normal hours, such as repair and maintenance work.
Disadvantages of working overtime
- Overtime pay comes at a premium rate for additional time spent working.
- If overtime is necessary because employees are wasting time during their normal working hours. (Get tips in this guide).
- When employees are working long hours on a regular basis, it can negatively affect their overall quality of work, their health and their personal lives. Also, if their time worked leads to fatigue, it may lead to increased absence.
- Employees can become used to overtime and the pay that comes with it, and it can be difficult to withdraw after some time.
Is working overtime worth it for businesses?
Obviously, there are advantages and disadvantages to getting employees to work overtime.
But it must be stressed that many businesses do not realise just how much time is being wasted by employees during normal hours, and if overtime needs to be worked due to poor time management, then no, it is not worth it for businesses. Instead, it is another unnecessary expense.
Quick case study! An IGDA study found that after eight work weeks of 60 hours each, employee productivity was the same as eight 40-hour weeks! Some businesses have decreased normal working hours, and noticed that the work gets done within those decreased hours…
You may wish to begin implementing methods to find out exactly how time is being utilised in your business.
Working overtime and contracts
Legally speaking, working overtime is always voluntary, and employees may refuse. It’s hard to get unwilling employees to put in extra hours if it’s not covered in the original agreement between employee and employer.
To this effect, it is essential to add into the contract:
- Overtime expectations.
- Overtime payment.
- Clarity on what constitutes normal working hours and what constitutes overtime.
- Disciplinary action when employees refuse reasonable requests to work overtime.
When employees refuse overtime
In some countries, the word, “reasonable” is bandied about, so employers may win a legal case if employees consistently refuse a reasonable request to work overtime, even when it’s not stated in the agreement between employee and company.
However, the best way to avoid issues is to have the contract cover overtime, but failing that, here are some suggestions for what businesses can do in the case where employees consistently refuse to work overtime, even when the request is “reasonable”:
- Discuss alternatives with the employee. For example, moving into another position that does not require overtime.
- Retrenchment is another option, so that you get to hire someone who will agree to working overtime. However, the employer must prove legally that the role requires the candidate to work overtime.
- Include a clause in the disciplinary code that states the consequences of refusing work overtime in accordance with their contract, so that if they refuse, it will be a case of misconduct. Be sure to make employees aware of the code. Include the process so that you are covered legally. For example, for this type of misconduct, a verbal warning is given for a first time offence, then a written warning for the second, and a final written warning for the third, and lastly, dismissal.
- Consider using contractors or freelancers to take care of surplus work. That way, you won’t need to pay a premium rate for overtime.
- Cross train employees to spread out the burden. It may reduce overtime expenditure.
How to legally get the most from overtime
It’s smart to use workforce tracking software to keep track of the number of hours worked, and tasks completed, and ensure maximum productivity, for both normal working hours, and extra hours.
That way, you know exactly what you are paying for, can more than likely significantly reduce overtime costs, and use the tool to increase productivity with automated employee scheduling.
EasyRoster workforce management software helps businesses minimise overtime and non-productive hours to increase staff cost efficiency.
Albert co-founded EasyRoster Software in 1995 and helped grow the business to where it is today. Albert has over 25 years of experience in Workforce Management and Software development which has helped the EasyRoster team build one of the best WFM systems on the market today.