Overtime comes at a high price and quickly eats into your business labor costs. It can feel like something you don’t have control over, but in reality, overtime doesn’t have to take over your profit margins.
Even while demand is high and budgets are low, here are several easy ways to reduce employee overtime.
1. Make sure your employees have the right resources
Learning how to better manage overtime is about making the most of regular working hours – work smarter, not longer. Many manual, tedious tasks can quickly eat up employee time throughout the day.
If monotonous day to day tasks eat up a majority of your employee time, then find ways to automate or make the tasks easier. Rather than having daily in-person meetings, use an online project management tool where everyone can check the status projects and their daily assignments. Planning tools such as Monday are easy to use and often free.
Using email automation or drip campaigns, you can quickly respond to customer inquiries instead of having to send individual emails one by one. You can also reduce the number of emails being sent back and forth with customers.
The small things quickly add up. It is essential to make sure that your employees spend the majority of their time on their actual job responsibilities and that they have tools at their disposal that can help them achieve their best work.
2. Treat overtime like the exception, not the rule
We often forget that company culture starts at the top. If you treat overtime like regular hours and a part of doing business, then your employees will do the same. Instead, overtime should be considered as a final option, not the first.
Changing views on overtime might be a challenge for employees who are used to working and thus receiving overtime pay. But for your business as a whole, relying consistently on overtime can lead to disengagement and employee burnout.
To help reduce overtime costs, you can cross train workers to reduce the amount of pressure put onto one or two skilled workers. Cross training employees allows you to better space out schedules and avoid overtime altogether.
3. Cross-train your workers
A pain point that businesses frequently run into is their business operations halting when a single part of the process fails. If only one employee is the most skilled and has the most experience, they will likely be picking up slack. These qualified individuals typically work the most overtime because, without them, your business would grind to a halt.
If you find that one employee is earning the majority of overtime or if they are the only individual who can do the job, then burnout is already on the way. What would happen to your business if that employee calls out sick? What if they go on vacation or leave your company?
By spreading out responsibilities and Specialties among your whole team, you can dress it will reduce the amount of overtime worked and keep employee burnout at bay. Rather than relying on a single skilled worker, train other employees to step in and take on more workload.
4. Identify overtime patterns
When you go to process payroll, it shouldn’t come as a shock. Rather than being unhappily surprised by employee overtime, you should get ahead of overtime before it even starts. Employee time clock apps and scheduling apps allow employers to set up overtime alerts so they can be notified when an employee is nearing overtime hours. Being alerted early to potential overtime will enable you to take preemptive action, such as moving schedules around.
It’s not only important to track the number of hours worked, but also how much overtime employees are earning and how frequently.
It would be best if you took the time to go back through employees’ payroll and carefully evaluate time card information. Are there certain times of the year where people are working more overtime? Are the same people working overtime each shift? Once you have evaluated your data, you can then compare your planned labor costs to your actual labor costs.
An employee time clock app can help you reduce overtime costs, by automatically alerting management when an employee is nearing overtime. You can then take appropriate action to find a replacement worker that hasn’t yet met the overtime threshold.
5. Invest in an employee time clock app
As previously mentioned, an employee time clock app is a great way to track and manage overtime. Time clock solutions such as Buddy Punch allow you to create overtime alerts on a daily or weekly basis. When an employee is approaching their threshold, both you and the employee can be notified by email or push notification.
6. Match staffing to demand
Endless overtime typically pops up during two different scenarios. The first is when demand outweighs labor. The second occurs when employees are improperly scheduled. Demand can quickly spike if your business is going through a period of growth or during busy seasons.
Increased profits are always good for businesses, but not if those profits are going directly to paying for overtime or health care costs. Working too much overtime is not healthy for anyone and can lead to high rates of turnover and employee burnout.
Which do you think is more cost-effective? Hiring a new employee to work as needed or paying overtime and losing your best workers? If your business has trouble keeping up with them and then consider hiring some additional help.
However, matching staffing to the man doesn’t necessarily mean hiring more employees. Another great way to reduce overtime is by learning how to schedule more efficiently. Efficient schedules can ensure that you have the right amount of employees is available when things get busy and that you aren’t overstaffed when things get slow. You should check your scheduling software to see how demand and staff compare.
If you’re having trouble reducing your overtime costs, it might be time to implement an overtime policy. This provides a set of rules and procedures that must be followed by employees and enforced by management.
7. Establish an overtime policy
Lastly, it is time to put your overtime rules into writing. An overtime policy should include how you will achieve those mentioned above and more. While taking state and federal laws into account, you should lay out how you plan to pay employees for overtime hours. If you use legal terms in your policy, make sure they are clearly defined.
A good overtime policy will also include new rules and procedures to help keep overtime under control. Most importantly, it would help if you decided who will approve overtime and how employees should discuss overtime with their supervisor.
In the end, your overtime policy should be written to match your business needs and set clear guidelines for everyone. If you have questions about labor laws or writing your overtime policy, it is a good idea to consult with a labor law attorney.