Overtime 101

I am writing a book about Shiftwork Operations in general. The chapter on overtime is easily 4 times longer than any other.  It's a complicate topic that is often a moving target and certainly - one size does not fit all.

I am planning several posts on the subject of overtime for for now, I just want to put out a few basic principles.

There are two basic types of overtime: Scheduled and Unscheduled.  Scheduled overtime is overtime that is an integral part of a shift schedule.  For example, a typical 24/7 schedule that uses four crews will have an average of 42 hours of work per week.  Those hours, in that schedule, that are in excess of 40 per pay week will be paid at the overtime rate.  These scheduled overtime hours are such an integral part of the schedule that an employee must take vacation to miss them.

Unscheduled hours are those hours added to the schedule but are not part of the regular schedule.  These hours can be scheduled way in advance or at the last minute.  The key is that the basic day-in-day-out pattern does not include these hours.

I take the time to distinguish between these two because when people talk about overtime, it is almost always in reference to Unscheduled Overtime.

There are two ways to calculate the rate of overtime.  It is either (a) Total overtime hours divided by total hours or (b) Total overtime hours divided by total straight time hours.  I prefer the later.  So, if you have a 40-hour schedule and you work 44 hours in a week, you have 10% overtime. (4/40 = .1).

How much overtime is the right amount?  The short answer is between 5% and 15%.  There is a much, much longer answer that takes into account things such as costs, seasonality, labor availability and fatigue.  I will go over those some other time.

The number one myth associated with overtime is that it is much more expensive than straight time.  The reality is that overtime is probably less than 10% more expensive than straight time.  This is because the benefit burden on straight time is probably about twice that of overtime.  Think about it.  When an employee works overtime, they don't earn more medical benefits, do they?

As far as the typical workforce is concerned, about 20% hate overtime, 20% love overtime and 60% will work their fair share.

Overtime causes fatigue, turnover, safety problems and overall disgruntlement amongst those that are forced to work it.

Overtime offers the opportunity to make more money, control costs and move labor to where the work is.

There are good and bad points to any amount of overtime.

Companies that operate with zero overtime are overstaffed.

Companies that think they can save money by eliminating overtime are correct only so far in their current inability to manage their workforce.  If the workforce is properly managed, then eliminating overtime means bringing in more straight time hours which has a marginal savings at best.

For more on overtime, check in on this blog from time to time.

If you want to speak with me about your overtime situation (no charge), I can be reached at (415) 472-3688.  Ask for Jim Dillingham.  Or, you can email me at jim@shift-work.com

Thanks for reading.

Jim