Beating Overtime Expense

You should also read "Warning About Labor Issues".

Look at your overtime expenses for the past few months. Does it bother you how often and how much you have to pay overtime? You are right to be annoyed. The expense adds up. Divide the total overtime portion by 3 to figure the "and-a-half" portion of "time-and-a-half." The additional "wasted" expense does not stop there. Remember, this is a payroll expense. Add roughly 12% more to cover the various employer taxes that apply also to the "and-a-half" portion. The good news is that there are three steps you can take to reduce your overtime expense.

STEP ONE: Pay more regular time and no more overtime.

You must pay overtime to anyone who works for you more than 40 hours in any week. Even if you own two separate corporations, even if one is in your spouse's name, and an employee works 25 hours at one and 25 hours at the other, you still must pay that employee 10 hours overtime. I am not suggesting that you break this rule. Instead, do this:

  1. Divide the total average monthly overtime by 3.
  2. Multiply 2 times the amount in step 1.
  3. This is what you "should" have paid in regular time.
  4. How much do you pay part-time people per hour?
  5. Divide the amount in step 3 by the hourly rate in step 4.
  6. This tells you how many part-time hours you can "buy" instead of "buying" the more expensive overtime hours.
  7. Hire the additional part-timers and rework your schedule.

STEP TWO: Hire the part-timers on a flexible schedule that is at YOUR convenience.

  1. You are hiring a new class, or new "type," of flex part-timer employee.
  2. The employee reports to work at a particular time, for example, 2pm.
  3. During the employee's shift, if your manager sees that you do not need that employee, then send that employee home.
  4. You probably cannot impose this sort of "flex" schedule on the regular employees you have now, but it will be very suitable to many who want parttime jobs. College students and retired people are ideal for this.
    If you do not think this will work because your employees will not co-operate, phase the plan in by replacing leaving employees with the new class of part-time employees.

STEP THREE: use some 40-hour weeks with 10-hour days.

  1. Although employees you already have will not want to become "flex part-timers," they will probably like the choice of working four 10-hour days and getting a day of the week off.
  2. Cover the regular employee's weekday off with one of the flex part-timers. That will help guarantee your flex part-timers with minimum hours.
  3. You will probably notice a decrease in the regular employees' days absent. Loosing a 10-hour day's wages is more painful than loosing an 8-hour day's wages.
  4. When a regular employee misses a day anyway, you will find it easier to fill the gap if you have several flex part-timers.