10 Best Practices for Managing Overtime

Scheduling hourly employees to work more than 40 hours a week can help overcome seasonal peaks in production or bridge a temporary labor shortage. But excessive overtime should be the exception, rather than the norm, in a healthy, productive manufacturing business.

The following 10 tips can help you manage overtime for a safer, more productive workforce:

1. Schedule overtime judiciously. If you consistently arrange for overtime above and beyond reasonable increments, you run the risk that workers will become tired, raising safety issues and causing productivity to suffer. Overtime also often increases absenteeism and tardiness. Workers may feel the need to request mental health days. While it’s perfectly acceptable — and frequently advisable — to build overtime into your company’s scheduling, do so sensibly. Your business can remain productive without sacrificing safety.

2. Cap overtime. Limiting overtime over a set period can relieve some scheduling uncertainty. When employees have a better idea of the upcoming overtime schedule, they’re less likely to show up late or take unexpected time off. In addition, safety won’t be compromised as much as it can be without overtime limits.
3. Track the sleep/wake circadian rhythm. Many workers find it difficult to ignore the natural rhythm of working during the day and sleeping at night. Because the human body experiences a low energy ebb between 3 a.m. and 6 a.m., working overnights is harder than working daytime hours. To help counteract this, consider tracking overtime by night and day shift hours. If your business uses fixed shifts, you might want to have a lower annual cap for night crews than day crews. If you use rotating shifts, make sure that no more than half of an individual’s overtime hours accrue during night shifts.

4. Impose length-of-time restrictions. Acknowledge the limits of human endurance. If your company bases its schedules on 12-hour shifts, curtail or eliminate overtime except in emergencies. You might extend an employee’s shift an extra hour or two if a replacement is late, but that’s it. The only regular overtime available to a 12-hour shift worker should occur on an off-day. If your business uses eight-hour shifts, don’t allow double-shifting and restrict overtime to a maximum of four hours.

5. Emphasize safety. When employees work longer than 10 hours, safety becomes an increased concern. Keep in mind that employees may be at risk because they’re:

>  Unaccustomed to working longer hours,

>  Lacking the days off needed to recuperate, and

>  Driving home at 3 or 4 a.m., a high-risk time to be on the road.

Double- and triple-check that all safety procedures are being observed, and scrutinize procedures to see whether there’s room for improvement.

6. Watch out for hoarders. When overtime is voluntary, some employees may crave the additional pay and put themselves at risk. It’s not unusual for 20% of manufacturing employees to perform 80% of the overtime work. Don’t cut them off completely, but try to transition to a schedule that spreads out the overtime more evenly. Make sure that employees are notified about the change in policy and that they understand the reasons behind it.

7. Set a pecking order. When overtime is regular — and voluntary — set up a list based on factors such as seniority or service time. The longest-tenured employees may have first shot at overtime but, to keep opportunities open, consider dropping the names of the people taking the most overtime to the bottom of the list. This gives more people a chance for overtime.
8. Cross-train. Overtime can be a problem when only certain workers do certain jobs. This can produce a disparity of overtime if extra time is required for a particular job. It might even force employees to work unwanted overtime. By training employees to handle more than one job, you can boost your company’s flexibility and avoid these scheduling snafus.
9. Match work to demand. Is your scheduling process effective? Is it succeeding in optimizing productivity. Analyze how and when to use overtime for maximum efficiency and to avoid having employees stand by idly as overtime pay liability piles up.
10. Keep tools and technology up-to-date. Upgrading the tools your staff uses daily can help your company run more efficiently. Technology, too, can be used to automate workflow and improve project management. Staying up-to-date lets employees be more productive during regular work hours, reducing — and potentially eliminating — the need for overtime.For any questions related to this article, please contact Tim Furbush at tfurbush@vlcpa.com or 800.887.0437.