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5 Strategies to Reduce Overtime Costs

August 1, 2022 | Staffing Blog

Businesses with hourly employees constantly have to be mindful of the number of overtime hours worked. Otherwise, you could incur excessive overtime costs that will impact your company’s bottom line.

There are undoubtedly busy seasons when you will need employees to work extra hours in order to meet a customer’s need or complete an order before a set deadline. But, if left unchecked throughout the year, overtime can quickly get out of control.

That’s why we recommend thinking through some strategies to reduce overtime costs. Taking a strategic approach will help you review the bigger picture of how your company can take action to reduce costs without sacrificing customer satisfaction.

What Strategies Can Help Reduce Overtime Costs?

When thinking through how to reduce overtime costs, the goal should be to find ways to reduce the need for overtime in the first place. Overtime should become a last resort rather than a regular part of doing business. Consider some strategies to achieve this goal.

1. Review Your Shift Schedule

Take a broad look at every schedule. Look for patterns of overtime popping up during specific shifts or amongst certain workers. Broaden out your view to the past 3, 6, 9, or 12 months. What could be causing an increase in overtime?

Once you identify patterns, start asking questions. Ask managers why there is an uptick in extra hours worked during specific times or amongst certain workers. Once you gather information, you can strategically think through how to adjust schedules and/or increase the number of workers during the busiest shifts that are racking up overtime hours.

2. Review Productivity by Worker

Unwanted overtime is oftentimes directly tied to a lack of productivity. Perhaps some workers are taking too long to perform their duties, which is causing them to work overtime to get the job done.

Take a look at the expected productivity during a shift versus the actual productivity to see if there is an issue. Then, think through how to close the gap and reduce overtime. You may need to provide the following resources to help workers increase productivity:

  • Schedule more training to help workers do their job more efficiently.
  • Ensure that workers have strong communication with their manager.
  • Provide workers with the right tools they need to get the job done.
  • Give workers a forum to ask questions that will help advance understanding.

3. Take a Vested Interest in Each Employee

A strategy that is often overlooked is simply understanding each person that works for your company so that you can help motivate them.

  • How is their work/life balance?
  • What is going on in their family?
  • Where does each employee see themselves in 5-10 years?
  • What is each employee’s career ambition?

Studies show that motivated employees are more productive employees, which will help reduce overtime costs. By caring about each person as a person and a worker, you can help them perform at a higher level to complete their work during their allotted shift.

4. Use Software Tools

Companies often wait too long to address overtime because they lack visibility into the big picture. Managers will see that employees are working a significant number of overtime hours but don’t see the cost impact. Comparatively, the accounting team or business office will see an increase in overtime costs, but they’re not on the ground floor to understand why overtime is on the rise.

If overtime remains siloed, then nothing will be done to address the issue. That’s why companies need to utilize software tools to help everyone in the company understand what’s going on:

  • Use data to monitor overtime levels.
  • Communicate about the justification for overtime.
  • Provide all relevant stakeholders with insights into the financial effects of overtime.

By monitoring overtime in real-time, companies can proactively adjust shifts and schedules before costs get out of control.

5. Optimize Your Labor Force

The last strategy that we will share is ensuring that you have the right people doing the right job in the right way at all times. In our experience working with companies across various industries, we have found that companies often lack the right talent to perform their duties, which leads to short-term fixes of asking other talent to work more hours to pick up the slack.

Not having the right person in the role can lead to several undesired outcomes:

  • A lack of productivity from unqualified workers slows everyone down.
  • Productive workers wear down from carrying the burden.
  • An unmotivated workforce leads to absenteeism and tardiness, causing the previous shift to work overtime.
  • Eventually, you will see unwanted turnover, which causes the remaining employees to work overtime to fill gaps until new employees can be hired.

Your company can implement this strategy by working with an award-winning staffing agency such as Allegiance Staffing. We have a deep roster of high-quality talent that can fill critical roles in your company. Our team of workforce experts will ensure that you have the right talent for the job so that your workforce is optimized for productivity.

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Contact Allegiance Staffing to Discuss a Labor Solution

Ready to implement our strategies to reduce overtime costs? Let’s discuss a labor solution that fits your exact situation. We customize our solutions to best match your need with our available talent so that you gain access to the best workers for the job.

Get in touch with us today for a no-obligation consultation. We look forward to helping streamline your workforce so that your business can flourish!