Overtime Running Over-Budget? 10 Tips for Managing Overtime

Overtime is an important topic for businesses of all sizes. Excessive overtime leads to overspending for your company and overworked staff—on top of various employment laws and labor regulations to consider. Managing overtime is a crucial topic for HR and managers to plan for and address. 

Overtime policies need to be clear and fair. Overtime issues are often the result of problems elsewhere in the company. Don’t enforce new policies before employees without updating and training appropriately.

The right HR software can streamline changes to your scheduling and timekeeping policies, automatically tracking overtime pay for each week. Approach excessive overtime as an opportunity to improve efficiency and help your staff become more efficient at teamwork.

First, try reducing the need for overtime

Managers and supervisors often swiftly address unexpected overtime problems by simply cutting hours. Another knee-jerk way to reduce overspending is to forbid employees from working overtime. That’s not managing overtime, its only creating more problems.

Sooner or later, most companies need the option for employees to work overtime. A blanket rule against overtime leaves employees feeling undervalued, like the company would rather reduce efficiency than pay overtime. It’s easier said than done, of course, but the better answer is to address the underlying causes of excessive overtime.

Identifying the causes of overtime

On their own, neither of these solutions work well in the long-term, nor do they address the root problems. Excessive overtime is likely symptomatic of staffing problems or efficiency roadblocks that need to be addressed. 

Here are some of the most common causes of overtime:

• Understaffing
• Absenteeism and tardiness
• Unexpected and/or heavy workload
• Process inefficiency and/or lack of adequate resources
• Poor employee performance

Manage overtime properly, when it’s necessary

Regulate overtime rather than outright prohibiting it. When issues run your employees into overtime, you need to properly manage that expense and all that comes along with it.

• Ensure overtime hours are productive
• Watch overtime employees for signs of burnout
• Spread out any additional workload as best as possible
• Ensure you are keeping accurate records of overtime hours for compliance
• Update your HR software can make scheduling and time management more efficient

How HR policy combined with HR technology can help you better manage overtime

Utilize the right time management system

According to the Bureau of Labor Statistics, the average American employee works around 4 hours of overtime a week. You need software that counts overtime hours (and minutes) accurately for each pay period. Accuracy is a critical step in managing overtime effectively.

READ: The Benefits of Time and Attendance Software

Make sure that your timekeeping solution is compatible with payroll software. Automatic overtime alerts tell managers and supervisors when they need to check the schedule and potentially take action. After employees have worked the extra hours, even if they violated company policy, you can’t just withhold the extra pay they are owed.

DISCOVER: 12 Essential Time and Attendance Software Features

Follow overtime regulations and compensation

Make sure your company policies (and actions taken by supervisors) align with federal overtime laws. The Fair Labor Standards Act (FLSA) doesn’t limit the hours of employees over 16 years old, but it does require at least time-and-a-half compensation after 40 hours. Make sure contractors and exempt employees are classified correctly.

LEARN: DOL Updates Federal Overtime Rules: Key Takeaways and HR Next Steps

Clarify timekeeping and overtime policies

If your managing overtime policies are not clear, then it’s time to update your employee handbook. Develop clear rules and procedures for timekeeping and overtime. Notify employees of changes to the handbook, and provide training sessions before enforcing new expectations. If employees are expected to avoid overtime hours, then those policies and processes should be clear.

DISCOVER: 20 Essential HR Policies Every Company Must Cover

Create smart (but flexible) employee schedules

The best timekeeping software solutions include user-friendly schedule creation. Smart scheduling software ensures you are accurately staffed with exactly the number of employees you need and where you need them. Stay flexible to respond to last-minute requests and unscheduled absences.

LEARN: Ten Tips for Creating Better Employee Schedules

Send out schedules early so that employees can identify and work to fix any conflicts. You can even allow employees to swap shifts and resolve their own conflicts, pending their supervisor’s approval.

READ: How to Keep Employees Engaged Using Scheduling Software

Track absenteeism and tardiness 

The employees who routinely run into overtime might be covering for absent employees. Documenting the problem is the first step toward efficiently managing tardiness and absenteeism. When you identify repeat offenders and lax departments, you know where to focus on making the company more efficient.

Incorporate data into performance reviews

Overtime increases the costs for the company, but the extra pay makes overtime attractive for employees. Track productivity and performance data to evaluate whether overtime is used efficiently. Unchecked overtime rewards employees for simply ‘riding the clock.’ Track which employees habitually run into overtime, and address any violations of company policies. 

READ: Four Keys to Kickstarting a Performance-Based Work Culture

Cross-train employees for added flexibility

Your most valuable employees can often cover for others who are absent. Unfortunately, the most flexible employees can run into overtime while performing extra duties. Use an LMS to cross-train employees and make the whole workforce more resilient, able to adapt to unscheduled absences and other changes.

Consider employee well-being

Many of your employees would prefer to avoid overtime. Make sure your scheduling system promotes a healthy work-life balance for staff. Prevent burnout by making employee mental health a high priority. Examine your benefits policy and workplace culture. Ensure employee well-being isn’t neglected in your overtime policies.

Learn more about Netchex’s Time and Attendance solution:

Learn more about our Time and Attendance software (including overtime management). Our Time and Attendance solution is fully integrated with our entire HR technology suite.

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