The 5 Myths of Overtime Management: How to Make OT Work For, Not Against, Your Business
The concept of overtime (OT) is a familiar one, especially in the United States. Woven into many companies and work cultures, overtime is an especially important aspect of front-line operations in always-on industries like energy, manufacturing, healthcare, and public safety. In fact, in the oil and gas industry, OT is considered a standard part of scheduling and is accounted for in the budget.
Even so, OT remains one of the most misunderstood and maligned practices in workforce management. Here, we debunk five major myths about OT and share how effective overtime management strategies — and the right workforce scheduling technology — can make overtime work for, not against, your business.
Myth 1: Overtime is Driven by Labor Shortage
Not all overtime is created equal. OT can be a symptom of several different issues, which stem from various factors and can affect your workforce scheduling — and, down the line, your business as a whole — in various ways: data transparency, workflow violations, or OT assignment fairness, to name a few.
The persisting labor shortage in industries like energy and manufacturing is challenging, and navigating the needs and preferences of your employees are complicating factors too. In instances when the problem is as simple as an inadequate number of labor resources, it can be difficult for a technology solution to assist with operational optimization. However, for many organizations a shortage of labor in combination with other factors is what is driving overtime.
For instance, one of our clients (a government agency) discovered that a large portion of overtime was triggered by employees volunteering to extend their shifts — and then declining at the last minute. The agency ended up having to call in mandatory OT from off-duty staff, which is more expensive. To solve that, they leveraged workforce scheduling technology to customize a workflow process that streamlined the volunteer sign-up process and de-prioritized volunteers who had previously declined shifts.
The bottom line: Understanding the true underlying causes of OT offers a smart starting point for reevaluating your workforce management policies and strategies around overtime.
Myth 2: Overtime Causes Too Many Grievances
Overtime doesn’t have to be the grievance nightmare that workforce managers perceive it to be. Automated scheduling technology takes the hassles and headaches out of overtime management, so that overtime can work for, not against, your organization’s work environment.
With Shiftboard’s intelligent automation, you can track your regular and emerging part-time and gig workers’ OT hours and shift preferences — including overtime flexibility — during mission-critical shift assignment. Automating preferences to favor employees who prefer overtime (and allow those to avoid it if desired) contributes to higher employee morale and productivity. For organizations with distribution policies such as seniority, scheduling software ensures equitable overtime distribution and distribution transparency in your organization, another overtime management strategy that boosts worker satisfaction and retention.
OT can be implemented grievance-free, which can drastically improve the way you do business. Successful overtime policies improve shift coverage, reduce absenteeism, raise morale, and support a healthy work-life balance.
In 24/7 shift-based industries, these changes often result in big savings. After implementing workforce scheduling technology, one of our major auto manufacturer customers was able to save $800 per employee per year on grievances associated with wrongful OT assignment. Employee complaints also went down by a whopping 93 percent.
Myth 3: Reports and Data Are All You Need for Effective OT Management
When it comes to managing overtime effectively, beware of companies that trumpet overblown promises and then overwhelm managers with a massive data dump. Instead, look for technology solutions that present data and reporting in a relevant and actionable way. Data should be tailored to the specific needs of your organization and provided when you need it. With the right workforce optimization engine, you can identify all possible scheduling options regarding overtime and then decide the best path to take.
Consider the circumstances of one major oil and gas company, which depends on data insights that go beyond sorting OT shifts worked by departments and teams. The organization can now go deeper, sorting criteria such as OT multiplier, premium shift changes, and OT refusals — all of which helps reduce OT costs and develop a much more efficient overtime management strategy.
Myth 4: Overtime Can Always Be Cut Back
Another challenge in complex industries like manufacturing, energy, and petrochemicals is certification requirements for certain shifts. This creates a smaller worker pool, where overtime becomes necessary for your business model. In some of these organizations, OT is mandatory and predictable, so it no longer has to wreak havoc on workforce managers or throw off budgets.
That said, the catchphrase “work smarter, not harder” also applies to overtime management. With effective, proven workforce scheduling technologies, managers can easily automate the schedule to identify skilled shifts and certified workers while equalizing general shifts, creating a bigger pool of workers to choose from, which lowers OT in the long run.
Myth 5: OT Management Is Only About Cost Control
Many workforce managers tend to view overtime solely as a negative impact on operational costs and bottom-line budgets, but there’s a bigger picture. Beyond the short-term solution to labor demand, an effective overtime management strategy helps establish stronger employee relationships. The latest research on hourly workers revealed that 89% are willing to work more hours for more pay. For many, overtime and its boost to their paycheck can create a positive work environment. Happy employees build a more cost-effective organization.
In other words, managing OT effectively is good for employees and good for business — but only if workforce managers dig a bit deeper to understand and evaluate its impact beyond the bottom line.
How Shiftboard Can Help You Manage Overtime
Many workforce scheduling solutions on the market have an overly simplistic view of how to manage overtime and how to reduce OT costs. Their approach, as a result, rarely goes beyond automating the scheduling process and OT calculations.
Managing overtime effectively against continued labor shortages requires a strategic, tailored approach that considers all the unique scheduling requirements of your facility: labor resources, production demand, internal policies, labor and union rules, safety regulations, and more.
Shiftboard helps you engage effectively with your workforce to understand flexibility needs with versatile mechanisms that accommodate worker preferences, ensuring a reliable and engaged labor pool. As complexity grows, Shiftboard’s industry-leading technology and expertise will help you adapt by making better decisions to achieve superior operational efficiency.
Recommended Additional Resources
How to Manage the Complexity of Fair Overtime Distribution
Learn how to ensure fair scheduling by equalizing overtime distribution and improve employee retention.
How to Improve Labor Utilization During Peak Demand
Learn why operations leaders are intensifying their focus on labor productivity and utilization.