9 Easy Ways To Reduce Your Employee’s Overtime

Sam Lovhaug

Overtime comes at a high price for businesses. It can often feel like your only option, but overtime doesn’t have to take over your profit margins. Even when demand is high and budgets are low.

In this article, you’ll uncover effective strategies for managing and reducing employee overtime. You’ll learn the significance of balancing work hours, the impact of overtime on both your budget and your team’s well-being, and practical steps to ensure a more efficient work environment.

Key takeaways:

Overtime can significantly impact labor costs and employee health.
Shifting company culture can play a pivotal role in how overtime is perceived and utilized.
Implementing smart scheduling practices and using employee scheduling software can drastically reduce overtime.
Cross-training employees ensures that responsibilities are evenly distributed, reducing the reliance on overtime.
Establishing a clear overtime policy provides guidelines and boundaries for both employers and employees.

Why is it important to reduce employee overtime?

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.

How to reduce overtime in your business

Reducing employee overtime is not only a great way to manage labor costs, but 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 just part of doing business, your employees will do the same. Instead, overtime should be treated as the final option, not your first.

Changing your “overtime culture” might be a challenge for the employees who are used to working and receiving overtime pay. But for your business as a whole, 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 warrant a conversation, it’s time to talk to your team 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—working 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 reading and answering emails alone.

If rote, 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 where everyone can check the status of the project and their assignments. Project planning tools like Asana are easy to use and often free depending on the size of your team.

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

The small things add up and can go a long way to reduce overtime. 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. If your team is spending their shift troubleshooting clunky software or old equipment, it’s time to replace them with something more efficient.

3. Track and identify overtime patterns

Payroll shouldn’t come as a shock. Instead of being unhappily surprised by employee overtime each pay period, get ahead of employee overtime before it starts. Today’s scheduling apps and work management software tools allow employers to set up tracking alerts for employee hours. If an employee hits their maximum for the week or is working over their usual average, knowing early gives you time to adjust schedules.

It’s not just important to track hours worked, but how much overtime employees are earning and how often. Forbes reports that just 21% 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 carefully evaluate timecard data. Are there certain times of the year, like during the holidays, where overtime is typically 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. They work the most overtime because without them, your business grinds to a halt.

If you notice one employee earning the most 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 and specialties amongst 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.

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 prefer and be more productive doing it from home 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. For employers, allowing employees to telecommute can save around $11,000 per employee each year.

Flexible work scheduling may not work for every business, and not everyone is cut out to work from home. Letting employees experiment with telecommuting or flex time can help reduce overtime.

6. Cap overtime

While overtime pay kicks in for non-exempt employees when they reach 40 hours no matter what, there aren’t any federal limitations on how much overtime your employees can work—or how little. Overtime is an inevitable number on your spreadsheet of labor costs, but it doesn’t have to be an endless cycle. 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 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 common. 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.

But remember: non-exempt employees must be paid 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. Overtime caps should be taken seriously, but don’t disqualify you from paying overtime at all.

7. Match staffing to demand

The endless overtime cycle typically 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 health costs. Working too much overtime isn’t healthy for anyone and leads to high rates of employee burnout and turnover. 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.

But 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 workforce management or 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 more staff is needed?

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

8. 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. 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.

A good overtime policy also includes the new rules or procedures that will help keep overtime under control. Most importantly, decide who approves overtime and how employees should discuss overtime with their manager. Set expectations for both supervisors and individual employees. Communicate how you plan to help everyone abide by new overtime caps or restrictions. Ultimately, your overtime policy should be written to match your business’s needs and set clear boundaries for everyone. If you have any questions about labor laws or writing your overtime policy, it’s always a good idea to speak to a labor law attorney.

9. Use employee scheduling software

Implementing efficient scheduling practices can help reduce overtime by ensuring that work is evenly distributed among employees—and that staffing levels match the demand. By accurately forecasting workloads, implementing effective shift planning, and optimizing employee schedules, employers can minimize the need for overtime by keeping the appropriate staffing levels for the customer demand.

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.

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.

Conclusion

Understanding how to reduce overtime 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. Dive in and explore its features today!

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.