9 Simple Strategies to Cut Employee Overtime

Discover effective strategies for managing and reducing overtime among your employees. You'll learn the importance of balancing work hours, how overtime affects your budget and your team's well-being, and the practical steps you can take to create a more efficient work environment.

The most important findings:

1. Overtime can have a significant impact on labor costs and employee health.
2. A changing corporate culture can play a crucial role in how overtime is perceived and used.
3. Adopting smart scheduling practices and using employee scheduling software can dramatically reduce overtime.
4. Cross-training employees ensures that responsibilities are evenly distributed, thereby reducing the amount of overtime.
5. Establishing a clear overtime policy provides guidelines and boundaries for both employers and employees.

Overtime comes at a high price for companies. It can often feel like the only option, but overtime doesn't have to eat into your profit margins. Even when demand is high and budgets are low, there are nine easy ways to reduce overtime.

Why is it important to reduce overtime?

Excessive overtime puts a significant strain on your staffing budget. Paying for an hour and a half is not the most cost-effective way to get the shift coverage you need. But working long hours can also be stressful for your employees, even if they are happy about the paycheck they bring. Too much overtime can make it difficult for your team to get enough sleep, which can ultimately lead to health problems that in turn cause absenteeism. In addition, your employees can no longer balance their professional and private lives as well, which causes additional stress.

Reducing overtime is not only a good way to reduce labor costs, but also a way to take care of the health and well-being of your employees. Check out these nine ways 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 work hour and see it as part of business operations, your employees will too. Instead, overtime should be treated as a last option, not the first.

For those employees who are used to working overtime and getting paid for it, changing your "overtime culture" may be a challenge. But for your company as a whole, a culture of overtime often goes hand in hand with a culture of disinterest and employee burnout. If your employees are so used to working late or coming in late that it doesn't even warrant a conversation, it's time to talk to your team and take a closer look at your company's values.

2.Make sure your team has the right equipment and resources

Reducing overtime is about getting the most out of employees' normal hours - they need to work smarter, not longer. There are many manual and administrative tasks that take up employees' time throughout the day. The average worker spends more than a quarter of their day just reading and responding to emails.

If routine, mundane tasks are taking up a lot of your team's time, look for ways to automate or simplify them. Instead of holding daily meetings, consider using an online project board where everyone can see the status of the project and their tasks.

Using email automation and customer drip campaigns, you can also respond to customer inquiries immediately instead of sending individual emails or emailing back and forth to find the best time to meet with a customer. There are also many automated employee training and onboarding programs that can be self-paced and completed more quickly.

The little things add up and can help reduce overtime. It's important to ensure that your team spends the majority of their time on their core tasks and that they have the tools they need to do their job optimally. If your team spends their shift troubleshooting clunky software or old devices, it's time to replace them with more efficient devices.

3.Track and recognize overtime patterns

The pay stub shouldn't shock you. Instead of being surprised by employee overtime every pay period, recognize it before it accrues. Today's scheduling apps and work management software tools allow employers to set up alerts to track employee hours. If an employee reaches their maximum weekly working hours or exceeds their usual average, you have time to adjust the schedule.

It is important to record not only the hours worked, but also how much overtime employees earn and how often. Forbes reports that only 21% of employees say they are highly engaged at work. Chances are that a small group of employees are doing the majority of the overtime.

Go through your employees' payslips and carefully evaluate time card data. Are there certain times of the year, such as E.g. the holiday period, when a particularly large amount of overtime occurs and is unavoidable? Do the same employees work more overtime every shift? Then compare your planned staffing budget with your actual staffing budget. Is your workforce planning accurate and in line with your budget, or does it need to be adjusted?

4.Cross-train your employees

A "single point of failure" is a part of a system that, when it stops working, brings the entire system to a halt. If an employee is the most capable or has the most experience, they are likely to be the one picking up all the slack. They work the most overtime because without them, your business grinds to a halt.

If you find that one employee is working most of the overtime or is the only one who can do the work, burnout is already on its way. What would happen if this employee called in sick? What if he takes a vacation or takes a new job and leaves your company?

Another way to reduce overtime is to distribute tasks and specialties across the entire team. Instead of relying on a single qualified employee, consider training other team members so they can step in and take the load off.

5. Try flexible work schedules to reduce overtime

The best work doesn't just happen from 9 a.m. to 5 p.m. It doesn't even have to take place in an office. More than half of workers say that when they need to get work done, they would prefer to do it more productively from home than in the office.

Research consistently shows that flexible work hours are beneficial for both employers and employees. Employees with flexible work schedules are more productive during work hours and use their time more effectively, resulting in less overtime or work not being completed as planned. When employers give their employees the option to telecommute, they can save around $11,000 per employee annually.

Flexible working hours are not suitable for every company, and not everyone is suitable for working from home. Giving your employees the opportunity to experiment with telecommuting or flextime can help you reduce overtime.

6.Limit overtime

While overtime pay for non-exempt employees kicks in when the 40-hour limit is reached, there are no federal restrictions on how much overtime your employees can work - or how little. Overtime is an inevitable number on your labor cost spreadsheet, but it doesn't have to be an endless cycle. Employers have the opportunity to determine how much overtime their employees are allowed to work and how much not.

Set a weekly, monthly, or even annual cap on overtime that your company can afford per employee. This limit can range from two hours per month to 30 hours per year. Try to allow enough flexibility for employees to work more overtime if necessary, but not so much that overtime becomes a habit. Limiting overtime ensures that work is distributed more evenly across the team and that everyone has the opportunity to work overtime if they value the extra pay.

But remember: Non-exempt employees must be paid for all overtime worked in excess of 40 hours in a workweek. Even if you set an official cap on overtime, employees who work more than 40 hours in a week must be paid time and a half. Overtime caps should be taken seriously, but they do not preclude you from paying overtime at all.

7.Adjust staffing levels to demand

The endless cycle of overtime typically occurs in two cases: when demand exceeds labor or when employees are not scheduled properly. Demand can increase quickly during peak seasons and periods of aggressive growth for your business. Rising profits are always good news for business owners - but not when the revenue goes directly to paying employees for overtime and healthcare costs. Too much overtime is not healthy for anyone and leads to high rates of burnout and turnover. What's more cost-effective: hiring a new employee to fill in for a few hours a week when needed, or paying overtime and losing your best employees? When it comes to keeping up with demand, consider hiring additional force.

But adjusting staffing levels to meet demand does not automatically mean hiring more employees. Another great way to reduce overtime is to plan smarter. Intelligent planning ensures that you have the right number of employees available during boom times and are not overstaffed during downturns. Review your workforce management or scheduling software to see how demand matches current staffing levels. Are you paying for too many employees who are not needed? Or do you pay employees overtime even though more staff are needed?

8. Establish an official overtime policy

Finally, it's time to put everything in writing. An overtime policy should outline how you will manage all of the above points - and more. Determine how you will compensate for overtime, taking local, state and federal laws into account. If you use legal terms in your policy, you should also define them.

A good overtime policy will also include the new rules or procedures that will help keep overtime under control. Most importantly, determine who approves overtime and how employees should discuss overtime with their manager. Set expectations for both managers and individual employees. Share how you plan to help everyone comply with the new overtime caps or restrictions. Ultimately, your overtime policy should be tailored to the needs of your company and set clear limits for all employees. If you have questions about employment law or the wording of your overtime policy, you should always contact an employment law attorney.

9.Use workforce scheduling software

Adopting efficient scheduling methods can help reduce overtime by ensuring that work is distributed evenly among employees and that staffing levels match demand. By accurately predicting workloads, effectively scheduling shifts, and optimizing employee schedules, employers can minimize the need for overtime by matching staffing levels to customer demand.

Conclusion

Reducing overtime isn't just about cost savings, it's also about promoting a healthier, more balanced work environment for your team. By adopting smart scheduling practices, changing company culture, and using tools to optimize work hours, companies can find the right balance between productivity and employee well-being.

If you want to take a proactive step in managing overtime, consider IceHrm the ultimate workforce scheduling app that promises efficiency, clarity, and a happier workforce. Dive in and discover the features today!

Overtime FAQs

What are the causes of overtime?

The main causes of overtime in the workplace include inadequate staffing, poor workload management, unexpected increases in demand, project deadlines, inefficient processes and ineffective time management.

How does overtime affect employee morale and productivity?

Excessive overtime leads to increased stress, burnout, fatigue and lower job satisfaction. Employee productivity can decrease, concentration can decrease, and overall performance can decrease.

Are there any legal requirements or regulations regarding overtime?

Yes, many countries have specific labor laws and regulations regarding overtime. These laws usually contain provisions on the level of overtime pay, the maximum working hours per day or week, the mandatory rest periods and the conditions for voluntary and mandatory overtime. It is important for employers to familiarize themselves with the labor laws that apply to their region.

How can employee engagement and motivation help reduce overtime?

High employee engagement and motivation can help reduce overtime by promoting a productive work environment. Engaged and motivated employees are more efficient, focused and committed to completing tasks within regular working hours, minimizing the need for overtime.

Are there technical solutions or tools that can help track and manage overtime?

Yes, there are different ways to record and manage overtime. This includes time tracking software, workforce planning software and human resources management systems. These tools can automate overtime calculations, provide real-time insight into employee schedules, and help employers proactively manage overtime.
How can employers effectively communicate overtime policies to their employees?
Employers can provide clear written policies and procedures. This may include explaining when overtime is permitted, how to request it, and what pay rules apply. Regular communications in the form of employee handbooks, training, and company-wide announcements can also help strengthen overtime policies.

How much overtime is too much?

The ideal amount of overtime can vary, but if consistently working more than 10-15 hours of overtime per week, it may be an indication that workload and staffing levels need to be re-evaluated.

How does overtime affect my bottom line?

Overtime can directly increase labor costs and have indirect effects such as: E.g. lower productivity, more absenteeism, higher turnover rates and possible negative impact on overall company performance.

Reduce overtime, boost productivity, and foster a healthier workplace with IceHrm's workforce scheduling app. Find balance today!