Paying Overtime? 4 simple tips to save you $2,000 per week like my client.
Are you the kind of business owner that thinks just because you are busy it is worth working overtime to ‘get more work done’? If this is true then you are probably not making any profit on that extra work and would be better off relaxing with your feet up sitting on the beach.
I recently dealt with a business that strived very hard to deliver all the projects they had taken on in an effort to keep their customers happy. The owners felt the only option was to work longer hours and pay their staff overtime. This scenario appeared to be a good short-term solution but was not sustainable for staff or the business long term. The business owner realised it was time to take action as they wanted to grow the business. To solve the overtime issues they needed an additional team and vehicle, pricing changes and a new time sheet policy.
A new vehicle was purchased and the newly formed team was ready to hit the ground running. New apprentices were recruited to join the other existing teams with experienced fully qualified staff. The new pricing structure and timesheet policy was implemented. The outcome was that we saved the business $2000/week!
In this case it was all about finding a way to be more productive whilst making sure each job is profitable. If overtime hours are common place these extra costs can hurt the profitability of a business.
When working out your production schedules it is worthwhile understanding the various stakeholders with respect to overtime:
Staff – Staff may like working overtime as it means more money in their pay packet. You also need to consider the negative effects of working extra hours on workers’ health and wellbeing, productivity and moral.
Customers – Customers are generally happy with the business working overtime as it means their job is getting finished promptly.
Business Owner – The business owner may be happy in the short term as they are keeping their customers and staff happy. However this can soon change when end quarter or financial year figures show a decline in profit margin.
4 Tips On What You Can Do To Save On Overtime
Recruit – Recruit early. If there has been a steady increase of sales or business activity or you know that you have a busier period coming up begin your recruiting process at least 2 months ahead of when you need them start.
On costing – When a customer has an emergency or an urgent job that needs finishing you can discuss with them the option of getting staff to stay back and paying them overtime. Explain to your customer that it will cost them more but it gives them an option and is a great way to provide timely customer service without costing you your profit.
Timesheet – Having a robust timesheet process is critical for monitoring overtime. There are some great apps available that have a time and location stamp. This is a great way to ensure that staff costs are allocated correctly to a job and is transparent, fair and equal.
Policy – Creating an overtime policy and procedure is really important. You can include items such as – ‘Overtime must be pre-approved by the site Manager or Business Owner’. For example a staff member calls at 3pm explaining that the job will take another 2 hours to complete. The Project Manager/Business Owner can then assess and consider if there is money in the job to proceed with overtime or tell staff to return to the job in normal working hours.
Do yourself a favour and take a look at how much overtime you paid over the past 12 months. How has this truly affected your PROFIT?