When Is Overtime Good for Business?

October 8, 2018

 

 

That may sound like a strange question. Many people are conditioned to believe that overtime is never good for a business. The reality is that overtime can be extremely cost effective and even build morale under the following conditions:

 

  1. Overtime is used to meet a short-term increase in demand (a short-term need)

  2. Overtime levels or use does not become excessive

  3. Policies favor people that prefer to work overtime, while those that do not want overtime can avoid it

  4. When overtime is mandatory, it is predictable

 

There are two ways that a need for overtime is created. The first, and more desirable way, is that there is an increase in the demand for products or services that a company offers and not enough people to deliver those products or services. The second, and more costly way, is due to a lack of people because of absenteeism, attrition, or any short-term decrease in the number of people available to the business. Why is it good to use overtime in these situations? Overtime is a far cheaper alternative than having more “just in case” people that may stand around on days they are not really needed or on days when the demand for your product or service is actually lower. Imagine a restaurant. Sometimes it is busy and at others there may only be a few people. Those peaks and valleys are fairly regular. Efficient restaurants schedule lots of wait staff for the busy hours and fewer for the less busy times of day. Sometimes those less busy times are unexpectedly busy. At these times it is better to use overtime than to always schedule extra people because those people that are always there when it is not busy add a lot of cost.

 

There is a such thing as too much overtime. Too much overtime can affect work-life balance, health & safety, and even productivity as people experience burnout. Studies have shown that people who consistently work overtime experience lower productivity. Those studies show that productivity diminishes significantly beyond 48 hours of work per week and beyond 60 hours people actually become less effective than just working a 40-hour week. For people working overtime for extended periods of time, overtime can become a powerful addiction. Think back to every pay increase you have had over a lifetime; the raise is great, but expenses quickly grow to match the increase. Expenses often grow to match the new income level. The result is an unwillingness to give up the additional income. Very often the same people that are asking for more time off and a better work-life balance are the ones complaining that they do not get enough overtime.

 

So when you do have to work overtime, it is always best if the first method of covering it is by soliciting volunteers. Within reason, employee morale is always maximized when the people who really want it can opt in and those that do not want overtime can opt out. This means that supervisors and managers need to be proactive about soliciting the overtime. At the same time, procedures for soliciting volunteers should not handcuff the business. People who volunteer should not be allowed to just decline to work the overtime they volunteered to cover.

 

This brings us to the last point – overtime should be predictable. Wait a minute! How can overtime be predictable if it is being used for a short term need such as a sudden absence or sudden increase in demand? Very simply, it comes back down to having a clear set of policies and consistent procedures for advising people of when they need to work overtime. For volunteers, it should be clear that their act of volunteering obligates them to work. For those that are “forced” to work overtime, the times and days they might have to work should be clearly defined as well as letting them know the days they would be less likely to be required to work overtime.

 

When is overtime bad? When it is too much, too often, and employees never know when to make plans with their families. I can’t tell you how often I am asked to create schedules to reduce overtime when what companies really need is to fix the bad overtime they are working.

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