9 Proven Ways For Reducing Overtime

Building an overtime reduction plan isn’t just about cutting hours, it’s about protecting margins and your team. 

At When I Work, we focus on employee scheduling and time tracking. But we also offer ways to help you use forecasting and labor budgets, as well as overtime alerts, to help you keep labor costs under control. 

Good employee scheduling is the foundation for preventing overtime. Here are some tips to help you reduce it and save your business money.

You’ll uncover effective strategies for managing and reducing employee overtime. You’ll learn the significance of balancing work hours and the impact of overtime.

Ready to start reducing overtime right now and save time while you do it? Try When I Work and see how easy it is. Sign up for your free trial today.

How to to build an overtime reduction plan for your business

Reducing employee overtime is a great way to manage labor costs. It’s also a way to take care of your employees’ health and well-being. Check out these nine ways you can reduce employee overtime:

1. Treat overtime as the exception, not the rule

Company culture starts at the top. If you treat overtime like any other hours worked and a part of doing business, your employees will do the same. Instead, treat overtime as the final option, not your first.

Changing your “overtime culture” might be a challenge for the employees who like to work overtime. But for your business, overtime often goes hand-in-hand with employee burnout. 

Are your employees so used to clocking out late that it doesn’t even warrant a conversation? Then it’s time to talk to your team about overtime management and take a closer look at your organization’s values.

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

Learning how to reduce overtime is about making the most of normal employee hours. You need to work smarter, not longer. There are a lot of manual and administrative tasks that eat up employee time throughout the day. The average worker spends more than a quarter of their day on emails alone.

If routine, day-to-day tasks eat up a lot of your team’s time, find ways to automate them or make them easier. Instead of hosting daily meetings, use an online project board. Instead of spending hours building your team’s schedule, use auto-scheduling.

Use email automation and customer drip campaigns to respond to customer inquiries. Use automated, self-paced employee training and onboarding programs.

You can also reduce the amount of time your employees spend trying to find each other to resolve issues. Use When I Work for employee scheduling and time tracking and you’ll also get access to team messaging. Your staff can send updates and ask questions throughout the day. 

3. Track and identify overtime patterns

Payroll shouldn’t come as a shock. Instead of employee overtime surprising you each pay period, get ahead of it. Today’s scheduling apps allow employers to set up tracking alerts for employee hours. If an employee hits their maximum for the week, knowing early gives you time to adjust schedules.

It’s important to track hours worked, plus how much overtime employees are earning and how often. Gallup reports that just 31% of employees say they’re highly engaged at work. Chances are, a small group of employees are working the majority of overtime hours.

Go back through your employee payroll and check timecard data. Are there certain times of the year where overtime is high and unavoidable? Are the same people working more overtime each shift? 

Then, compare your planned labor budget to your actual labor budget. Is your employee scheduling accurate? And does it match your budget in reality, or does it need some adjusting?

4. Cross-train your employees  

A “single point of failure” is part of a system that will bring the entire system to a halt if it stops working. If one employee is the most skilled or has the most experience, they’ll likely be the ones picking up all the slack.

If you notice one employee with more overtime, or if they’re the only one who can do the job, burnout is already on its way. What would happen if that employee calls out sick? What if they take a vacation, or take a new position and leave your business?

Spreading out responsibilities among your whole team is another way to reduce overtime. Instead of relying on a single skilled employee, train other team members to step in and pick up the load.

Read more in: The Successful Manager’s Guide to Cross-Training Employees

5. Try flexible work schedules to reduce overtime

The best work doesn’t only happen from 9-5. 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 be more productive at home.

Research shows that flexible work schedules benefit both employers and employees. Employees with flexible schedules are more productive during the hours they do work. 

They use their time more effectively. It reduces the chance of overtime or not getting their work done as scheduled. Letting employees to telecommute can save around $11,000 per employee each year.

Flexible work scheduling may not work for every business. Experiment with telecommuting or flex time to help reduce overtime.

If you have employees that need to be on site, you can still use flexible scheduling to your advantage. When I Work lets you build the schedule with OpenShifts, and then you can offer them up to all of your employees. 

Your staff will choose the shifts that fit into their lives best. You reduce the chance of no-shows. This alone can reduce overtime, because you’re not trying to fill holes in the schedule. 

6. Cap overtime  

Overtime pay kicks in for non-exempt employees when they reach 40 hours no matter what. But there aren’t any federal limitations on how much or how little overtime your employees can work. Employers have the power to set how many overtime hours employees are or aren’t allowed to work.

Determine a weekly, monthly, or even annual cap of overtime hours your business can afford. 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. 

Capping overtime ensures that work gets distributed amongst your team. Plus, everyone has a chance to work overtime hours if they’d appreciate the extra pay.

But remember: you must pay non-exempt employees overtime for any hours worked over 40 in a workweek. Even if you set an official cap on employee overtime hours. 

If an employee works more than 40 hours in a week, they still must be paid time and a half. Take overtime caps seriously, but they don’t disqualify you from paying overtime at all.

7. Match staffing to demand

Demand can spike during busy seasons, or during a period of aggressive growth. Increased profits are always great news for business owners. But not if your earnings are going to pay employees for overtime and health costs. If keeping up with demand is the issue, consider hiring some extra help.

Matching staffing to demand doesn’t automatically mean hiring more. Another great way to reduce overtime is to learn how to schedule smarter. Smart scheduling ensures you have the right amount of staff available when things are busy. And that you aren’t overstaffed when things are slow. 

Check your scheduling software to see how demand and current staffing stack up. Are you paying for too many employees who aren’t needed on the clock? Or are you paying overtime for employees when you need more staff?

Also check out: How To Create A PTO Policy For Shift Workers

8. Establish an official overtime policy

Finally, it’s time to put your overtime reduction plan in writing. An overtime policy should include how you’ll do all of the above—and more. While taking local, state, and federal laws into account, lay out how you plan to compensate for overtime hours. If you use any legal terms in your policy, be sure to define them. 

Here are a few more things to include in your overtime policy:

• New rules or procedures that will help keep overtime under control
• Who approves overtime
• How employees should discuss overtime with their manager 

Set clear expectations and boundaries for both supervisors and individual employees. Communicate how you plan to help everyone abide by new overtime caps or restrictions. Ultimately, write your overtime policy to match your business’s needs. 

If you have any questions, it’s always a good idea to speak to a labor law attorney.

Related read: How To Write An Employee Attendance Policy That’s Fair To Everyone

9. Use employee scheduling software to reduce overtime

Implementing efficient scheduling practices can help reduce overtime. You’ll ensure that work is evenly distributed among employees. And you’ll match staffing levels to demand. By forecasting workloads, implementing effective shift planning, and optimizing employee schedules, you can minimize the need for overtime.

When you use When I Work to build the work schedule, you’ll be able to see your labor budget as you fill in the shifts. And you’ll get an alert if you schedule someone for overtime, so you’ll always know the cost of your schedule. You can make adjustments to ensure your labor costs stay in line.

Why overtime management matters for your business?

Paying time and a half isn’t the most cost-effective way to keep the shift coverage you need. Here are some of the key reasons that you should reduce overtime at your business:

Ballooning labor costs

Excessive overtime is definitely hard on your labor budget. And with new laws increasing the threshold for lower-paid salaried employees, overtime costs are set to go even higher, expecting to transfer $1.5 billion from employers to employees annually. 

Difficult work-life balance for your employees

Giving your employees a lot of overtime can be hard on them even if they like the paycheck that it brings. Too much overtime can make it difficult for your team to get enough sleep or downtime, which can ultimately lead to health problems that cause absenteeism issues.

For example, imagine you’re giving your best workers the clopening shifts, which means they close late into the night and then open early the next morning. That’s hard on them physically, which could lead to them getting sick and needing time off from work. 

Decreased productivity

When your team is exhausted and having a difficult time managing their home life due to all of the overtime they’re getting, they’re going to be stressed out and worried. That means they’re not focused on work, which not only causes decreased productivity, but also increases the risk of errors and even accidents.

Related read: How To Reduce Labor Costs: 9 Strategies

Try a free 14-day trial of When I Work to see how easy it is to not only build the work schedule, but use it in a way that makes it easy to reduce overtime. You’ll get overtime alerts while you’re creating the work schedule, so you know who’s close to overtime and who can pick up another shift to even out the load.

Simplify overtime management with When I Work

Understanding how to create an overtime reduction plan is not just about cost-saving, but also about fostering a healthier, more balanced work environment for your team. 

By implementing smart scheduling practices, shifting company culture, and using tools designed to optimize work hours, businesses can strike the right balance between productivity and employee well-being. 

If you’re looking to take a proactive step in managing overtime, consider When I Work—the ultimate employee scheduling app that promises efficiency, clarity, and a happier workforce. Start your 14-day free trial now!

Overtime FAQs

What causes overtime?

The main causes of overtime in the workplace can include inadequate staffing levels, 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 reduced job satisfaction. Employees may experience decreased productivity, diminished focus, and a decline in overall performance.

Are there any legal requirements or regulations regarding overtime?

Yes, many countries have specific labor laws and regulations governing overtime. These laws typically include provisions for overtime pay rates, maximum work hours per day or week, mandatory rest periods, and conditions for voluntary and mandatory overtime. 

It’s important for employers to familiarize themselves with the labor laws applicable to their region.

How can employee engagement and motivation contribute to reducing overtime?

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

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

Yes, there are several ways to track and manage overtime. These can include time tracking software, employee scheduling software, and workforce management systems. These tools can automate overtime calculations, provide real-time visibility into employee schedules, and help employers proactively manage overtime.

How can employers effectively communicate overtime policies to employees?

Employers can provide clear written guidelines and procedures. This can include explaining when overtime is allowed, how it should be requested, and any relevant compensation policies. 

Regular communication through employee handbooks, training sessions, and company-wide announcements can also help reinforce overtime policies.

How many hours of overtime is too much?

The ideal number of overtime hours can vary, but consistently working more than 10-15 hours of overtime per week may indicate the need to reassess workload and staffing levels.

How will overtime affect my bottom line?

Overtime can increase labor costs directly and have indirect effects such as decreased productivity, increased absenteeism, higher turnover rates, and potential negative impacts on overall business performance.

What is an overtime reduction plan?

An overtime reduction plan is a way for your company to reduce its reliance on overtime hours. It usually starts with looking at historical data to determine how many employees you need, and then building a work schedule to effectively manage your staff.

How do I create an overtime management policy?

First, make sure you take into account all of your federal, state, and local labor laws pertaining to overtime. Then, create a set of rules around when overtime is okay and when you’d prefer to avoid it. Also, make sure the approval process for overtime hours is clear for both managers and employees.