Productivity Tips for Companies to Reduce Overtime Expenditures

Overtime is the amount of time someone works beyond normal working hours. Employees who work overtime hours regularly experience numerous mental, physical, and social effects. Significant effects include stress, lack of free time, poor work-life balance, and health risks. Employee performance levels could also be lowered. Long work hours could lead to tiredness, fatigue, and lack of attentiveness.

Paying employees extra wages for working overtime may seem like a quick way to increase output. But as quick fixes so often do, it can actually hurt your business in the long run. Not only does overtime mean that employers pay more for less work, but it also contributes to an unhealthy workplace culture that leads to increased stress, sick days, and higher turnover rates.

Paying More for Less Productivity

Based on research, people are only really productive for 3 hours a day. As the hours drag on, it becomes less likely that those final overtime hours include peak productivity. In fact, requiring long hours is a surefire way to kill efficiency because financial incentives can’t replace human psychology.

Illustrating this point more simply, an IGDA study showed that after eight 60-hour work weeks, productivity ended up being the same as eight 40-hour weeks. This means employers who exercise consistent overtime work essentially pay more for the same amount of work, while stressing out their employees and contributing to burnout. In a sense, the extra hours are pointless.

In fact, when the a few major companies tracked its most productive employees and their work culture, they came to note that these best performers don’t work the standard eight hours a day. Using frequent breaks similar to the Pomodoro Technique, they worked in sprints, focusing intensely for 52 minutes and taking a break for 17 minutes.

Repetitive tasks are especially prone to boredom and reduced productivity because the longer you repeat something, the less attention you pay to what you’re doing. Providing frequent breaks and staying away from long hours is especially important for workers who perform repetitive manual labor.

From the employer’s perspective, asking employees to stay late and work longer hours comes down to paying more for less work. Or as one manager put it, they’re paying 50% more for 50% less. From any financial standpoint, this is not a very smart investment.

Burnout Leads to High Turnover Rates

Consistent overtime will inevitably result in burnout. But as it turns out, “burnout” isn’t just about being tired, sleep-deprived or less productive. It can actually be fatal.

Research conducted by the University College London and the Finnish Institute of Occupational Health found that people who worked three hours or more than an average seven-hour workday carried a 60% higher risk of developing heart disease. This was striking because the increase didn’t happen with one or two hours of overtime work; only when it jumped to three hours did the probability rise.

When professors from Harvard and Stanford set out to write a paper on the correlation between the cost of healthcare and stress at work, they found that workplace stress led to 120,000 deaths and $125 to $190 billion a year in the U.S. For employers, this is a big problem because stressed out and unhealthy employees take more sick days, are less productive, require colleagues to take over their absences, and ultimately cost employers as a result. Continue this cycle and it can lead to employees leaving for better working conditions, contributing to a higher turnover rate for the company overall.

For jobs in the manufacturing and warehousing industry where occupational hazards are common, burnout is even more of a problem because of the physical threats it poses. Since humans aren’t wired to work constantly and require rest to function properly, long hours only increase chances for accidents.

Employees who worked overtime faced a 61% higher risk of accidents across multiple industries, suggesting that improper scheduling was at fault rather than the work environment itself. This aligns with the three causes of burnout as outlined in the book Time, Talent and Energy:

Excessive collaboration
Weak time management disciplines
Tendency to overload the most capable with too much work

Alternatives to Overtime

Here are more effective solutions to increasing output than overtime. If long hours decrease productivity, one alternative is to find fresh workers who can focus well for the few extra hours you need for your business.

HBy hiring contract workers, you can get maximum efficiency at no extra cost. Freelancers don’t require overtime wages, and their productivity levels aren’t affected by a full day of work at your company. By hiring contract workers, you can get maximum efficiency at no extra cost. Freelancers don’t require overtime wages, and their productivity levels aren’t affected by a full day of work at your company. They may not be the most experienced or skilled, employing them is a better strategy than dragging on a tired employee who can’t perform their best.

Productivity Tips for Overtime Management

Not only does overtime rank as one of the biggest ongoing expenses for most companies, but the correct, or incorrect, management of overtime can mean the difference between huge payouts, low morale, and vulnerability to changes in overtime regulations. Overtime pay law stipulates that not paying overtime is illegal if your employees are non-exempt. Here are a few tips you can take note to manage overtime.

Ease back on meetings

Even though team meetings can be helpful, they may not always be the best use of employees’ time. We’ve all been in the meeting that lasts an hour, with each person presenting a few minutes of project status updates…and then spend the rest of the time on their phone. But your company—and more problematically, your employees—just lost a good chunk of their workday that could have been spent accomplishing real work. Instead of relying exclusively on status meetings, make better use of digital work management, task management or shared project-tracking tools with automated communication.

Watch your team's utilization rates

As a manager, you want to have insight into your team’s bandwidth. But how do you know if your team is working as efficiently as they could? If they are working overtime, do you know why? Implement a system to measure staff utilization rates to see just how effectively their time is spent. If you can see everything every member of your team is working on, you can see how much work they have on their plate and will be careful not to overtask them. You’ll also be able to ensure that your resource allocation is fully optimized.

Establish your overtime policy

As a manager, you can control how much overtime your team works by putting specific policies in place that emphasize work-life balance. Allowing flexible work schedules, remote working and unlimited paid time off are all effective ways to give your employees a greater sense of control over where and when they work. Without them, your employees may automatically default to a workaholic mindset and assume that working longer hours will lead to promotions, increased compensation and better job security overall.

Give employees the right tools to work efficiently

Tools like email, enterprise social platforms and spreadsheets are perfect for communication and budget management — but inefficient when it comes to assigning tasks, tracking project status and accessing information required to do the job. Instead, give your team a system for work planning and work management that not only makes assigning and managing tasks easier, but also allows you to provide the details for a project up front and in one place. Features such as automation of communication and reporting save employees major time because no extra hours are needed to maintain spreadsheets or follow email. (Of course, this is easier said than done for smaller teams; for larger teams, it’s practically a necessity).

Allow flexible work schedules

With cloud-based tools, it’s a lot easier to give employees the option of working more flexible hours, since they can log in from anywhere to access work information. If an employee needs to take time off to care for a sick child or to attend a family event, allow it — but remind the employee that it’s a two-way street. If you need the employee to put in some extra time to hit a deadline, he or she should expect to return the favor. After all, it’s not so much about how many hours you log in, but about how effectively you accomplish your tasks.

Lead by example

Employees who see their managers working excessive overtime will naturally think they are expected to do the same. This sets up a pattern of inefficiency, overwork and burnout all-around. Instead, proactively discuss overtime policies and expectations with your employees, and ask managers and supervisors to model good behavior, too. Discourage them from responding to or sending non-critical emails late at night or on weekends, and encourage them to fully unplug during PTO.

We may never return to the traditional 40-hour workweek, à la Don Draper. But with the right tools and strategies in place, employees can work more effectively in the office rather than out of the office. Let’s turn back the clock on overtime and turn workaholics into well-balanced workers.