When an employee works over 40 hours in a workweek, you may be required to pay them additional wages at a higher rate. Overtime ranks as one of the biggest ongoing expenses for most companies, and poor management of overtime can cost your small business a lot of money. And there is generally no limit on the number of hours of overtime a person can accumulate. If your staff is clocking too many extra hours, it could be for the following reasons:
- Poor time management skills
- Thinking it’s expected
- Wanting to earn extra pay
- Heavy project loads
- Staffing shortages
The good news is, once you’ve identified the cause, you can find a solution that fits. Here are ten ways you can reduce overtime – and help the bottom line – in your small business.
- Eliminate overtime culture
Overtime should be treated as the final option, not your first. Changing your “overtime culture” might be a challenge for the employees who are banking on getting overtime pay, but for your business, a culture of overtime often goes hand-in-hand with a culture of disengagement and employee burnout. If your employees are so accustomed to working longer or clocking out late that it doesn’t even lead to a conversation, it’s time to talk to your team and take a closer look at your organization’s values.
- Lead by example
Company culture starts at the top. If you treat overtime like any other hours worked and just part of doing business, your employees will do the same. They see managers working crazy overtime hours and start to think they are expected to do the same just to keep their jobs. This can easily lead to overwork and burnout. I’m not sure when, but at some point it became a badge of honour to still be at the office at 9 pm. To me, someone who puts in 70 hour weeks needs to find ways to work smarter and more efficiently. So make your expectations clear. Discuss overtime policies with your employees, and ask managers and supervisors to model good behavior, too. Discourage them from responding to or sending non-critical emails late at night or on weekends, and encourage them to fully unplug during vacation time.
- Help with time management
Time management is a skill. And not everyone has it, to begin with. Some people may struggle with planning and prioritizing tasks, which causes them to work longer than necessary. But it would be shameful to let one deficiency deprive you from the benefits of an employee’s other talents. Likely the reason you hired them. You can help these individuals increase their efficiency during scheduled hours by offering training to improve their time management skills. Set clear timelines and coach them on how to prioritize their work. Then, check in often to see how they’re doing.
- Make sure your team is properly equipped
Reducing overtime is about making the most of normal employee hours—working smarter, not longer. You need to reduce the time your employees spend on manual and administrative tasks that eat up their time. Some estimate the average worker spends more than a quarter of their day reading and answering emails alone! Find ways to automate these tasks, or make them easier. For instance, there are a number of project planning tools out there to help. Easy to use, depending on the size of your team, and some for free. like Asana are easy to use and often free depending on the size of your team. It’s important to make sure your team spends the majority of their time on their actual responsibilities, and that they have the tools they need to do their best work.
- Reduce meetings where you can
Face to face meetings still have their place and can be helpful. But sometimes they are not the best use of your employees’ time. We’ve all been in the meeting that lasts an hour, with each person presenting a few minutes of project status updates…and then spend the rest of the time on their phone partially listening to the next presenter. Poof! Gone is a substantial chunk of their workday that could have been spent accomplishing real work. Instead of relying exclusively on status meetings, make better use of digital work management, task management or shared project-tracking tools with automated communication.
- Cap overtime
You, as the employer, have the power to set how many overtime hours employees are or aren’t allowed to work. Payroll costs shouldn’t come out of the blue, so establish a weekly, monthly, or even annual cap of overtime hours your business can afford to pay per employee. It could be anywhere from two hours a month to 30 hours a year. Try to build in enough room so that if employees need to pitch in and work more overtime they can, but not too much where overtime begins to feel like the norm. Capping overtime ensures that work gets distributed more evenly amongst your team and that everyone has a chance to work overtime hours if they’d appreciate the extra pay.
- Cross-train your employees
If you notice only a couple of people are working overtime regularly, it might be because they are the only ones qualified to do their job, causing them to have heavy project loads that are keeping them at wor long hours. To help take the load off, cross-train some of your other workers so they can help.Cross-training your staff can help prevent issues if someone is sick, on vacation, or decides to leave your company. Additionally, it can boost morale because more members of your team will feel like they’re actively contributing to your company’s success. This can increase productivity, further reducing overtime work.
- Match Staffing to Demand
The overtime issue generally pops up in two scenarios: when demand outweighs labor, or when employees are improperly scheduled. Demand can quickly spike during busy seasons and when your business is going through a period of aggressive growth. Increased profits are always great news for business owners—but not if your earnings are going directly to paying employees for overtime and possibly heath issues. Working too much overtime isn’t healthy for anyone and leads to high rates of employee burnout and turnover. So, you need to decide which is more-cost effective; hiring a new employee to pitch in a few hours a week as needed, or paying overtime and losing your best employees? If keeping up with demand is the issue, consider hiring some extra help. If you see that overtime hours increase around the same time(s) each year, consider hiring a seasonal worker. It will allow you to bridge the gap in manpower, but also prevent you from laying off a staff member when business returns to normal.But matching staffing to demand doesn’t automatically mean hiring more. Another great way to reduce overtime, is learning how to schedule smarter (as we discussed in a previous article, “The Importance of Scheduling at Your Small Business.”). Smart scheduling ensures you have the right number of staff available when things are busy, and that you aren’t overstaffed when things slow down. Smart Scheduling software lets you know if you’re paying for too many employees who aren’t needed on the clock, or paying overtime for employees when more staff is needed. Important information for your bottom line.
- Try flexible work schedules
The best work doesn’t only happen from nine-to-five – it doesn’t even have to happen in an office. Over half of employees report that, if they need to get work done, they would prefer – and be more productive – doing it from home rather than at the office.Research shows, over and over, that flexible work schedules benefit both employers and employees. Employees with flexible schedules are more productive during the hours they do work and use their time more effectively—reducing the chance of overtime or not getting their work done as scheduled.Flexible work-scheduling may not work for every business, and not everyone is cut out to work from home. Allowing employees to experiment with telecommuting, or flex time, can help reduce overtime.
- Establish an official overtime policy
Finally, it’s time to put everything in writing. An overtime policy should include how you’ll do all of the above—and more. It should clearly lay out how you plan to compensate for overtime hours and include the new rules or procedures that will help keep overtime under control. Most importantly it should decide who approves overtime and how employees should discuss overtime with their managers, while setting expectations for both supervisors and individual employees. Ultimately, it is meant to communicate how you plan to help everyone abide by any new overtime caps or restrictions.
There are these and many more ways to control overtime issues at your small business. And, as always, there’s a Nerd to help you do it.