How to solve your overtime management problems

Achieving a healthy work-life balance has never been more important, but overtime remains common in the UK nevertheless.

In fact, employment specialists Reed report that one-in-five Brits work more than an extra day of overtime every week, of which only 40% are compensated for their time.

Employees in hospitality, retail and construction are particularly accustomed to working late to finish tasks, help out during busy periods, or simply to try to impress the boss and show that they're going the extra mile.

We're not here to judge whether this work culture is healthy or practical. That all depends on individual company culture and how overtime is managed at your business.

In general, however, there are definitely some advantages and disadvantages for employers utilising overtime. Today, we'll be examining both of these — as well as discussing the legal requirements surrounding overtime, and how to overcome common problems associated with stay working additional hours.

Benefits of overtime

Staff working overtime isn't always a bad thing. In some cases, it can actually be beneficial to both your business and your employees.

• Prevent bottlenecks during busy periods. In businesses with seasonal variation, making use of overtime when things are busiest makes perfect sense. It helps reduce your reliance on seasonal staff, too.
• Finish tasks that can't easily be shared. It's impossible to switch delivery drivers or train guards at the end of their shift if they're running late and aren't back on-site.
• Complete tasks that would otherwise be disruptive normal business hours. Moving servers, performing maintenance on equipment and systems, or making changes to the shop's layout all cause disruption if they're carried out when everyone's at work or your shop is open. Staying late or starting early is the best way to minimise problems with these tasks.
• Keep staff happy. Many employees will welcome the chance to earn extra pay, especially ahead of expensive periods like Christmas or before the summer holidays. Depending on the overtime system you use, it can be a real selling point for candidates during recruitment.

That being is, overtime isn't always good news.

Problems with overtime

• Employee fatigue. Overtime isn't always evenly shared between staff. Often, a handful of employees shouldering most of the burden. While they might be pleased with their pay checks, working long shifts frequently will cause fatigue, stress and burnout. This isn't good for your team — or your business.
• Increased labour costs. If your overtime policy offers extra pay for workers exceeding their normal hours, the cost soon adds up and put additional pressure on your business.
• Loss of productivity. No employee is as alert at the end of a 10-hour shift as they were at the start. Reduced performance carries costs. Some employees might also work sluggishly so that they have to take overtime, netting them more pay for doing the same amount of work.
• Employee expectations and reliance. If you ever decide to adjust your overtime policies, you might face a backlash from employees as they might be reliant on the extra pay.

Thankfully, a smart overtime policy can reduce (if not eliminate) many of these downsides.

Here are some things to consider when deciding whether or not to allow — or continue allowing — your staff to work overtime at your business.

Overtime: things to consider

First off, review your current approach to overtime. Here, you need to seek feedback from managers and employees alike.

Managers

Ask managers and supervisors some or all of these questions.

• Do you think the costs of overtime are sustainable?
• Are we risking the health of our employees through too much overtime?
• Would we be better off hiring more temporary or permanent staff instead of relying on overtime?
• Are certain roles a problem? Can we train other employees to work these roles?
• Is it 'normal' for staff to work overtime?
• Are you fully aware of the details of our overtime policy? Are employees aware?
• Do you think the current policy is too generous or too mean?
• What changes would you make to the system, and why?

Your goal here is to understand the perspectives of managers across the company, who may well see different sides of the overtime policy in action.

Employees

Your overtime system should work for employees, too — so find out what they want from it.

• What do you like and dislike about our current overtime system?
• Do you know where to find written information about our overtime policy?
• Do you think the policy is applied fairly?
• What changes would you make to the system, and why?

Data

Another aspect of your overtime "health check" is data. Try to quantify the cost of your current policy. The direct costs will be easy enough to figure out, but hidden costs such as higher stress levels and lower efficiency are more difficult to assign a figure to. Estimates will do.

It's also wise to estimate the cost of hiring employees for particular roles, whether part-time or full-time, permanent or temporary. If the recruitment cost for certain roles is less than overtime is costing you in that role, you should probably look at adding another employee to your team.

Given the difficulty of estimating the indirect costs and benefits of a particular overtime set up, it's best not to base your decision solely on your figures. Always take staff feedback into account.

You're never going to please everyone with your overtime system, but by listening to employees and managers you can draw up a policy that'll work for your business without causing too many staff complaints.

Legal requirements surrounding overtime

Before going ahead and drafting your new system, check that your plans won't break any laws. We're focusing on the UK in this article, so if you're based elsewhere, check local laws.

Is unpaid overtime illegal?

No. There's no legal requirement for employers to pay staff for working beyond their contracted hours.

However, these extra hours (and their pay rate) are used to calculate overall pay rate. This figure must be equal to or above the national minimum wage.

Is there a maximum amount of overtime employees can work?

Yes - but employees can opt out of this. 48 hours a week on average (across 17 weeks) is the legal maximum an employee can work for, but employees can 'opt out' of the 48-hour working week in writing.

Can employees be forced to work overtime?

Yes — but only if their contract states that overtime is compulsory. Employees also can't be forced to work beyond 48 hours a week unless they've opted out.

Can specific employees be prevented from working overtime?

Yes, unless the employee's contract states that overtime is guaranteed. Make sure you aren't discriminating against certain employees by restricting overtime. You must also treat part-time and full-time staff equally.

Does overtime count towards holiday pay?

In some instances. Guaranteed overtime must be included in holiday pay calculations.

Also, following a recent ruling, non-guaranteed compulsory overtime must now be taken into account — but note that this only applies to the EU's required four weeks of statutory annual leave, and not the UK's 5.3 weeks.

The role of voluntary overtime is less clear-cut. Some rulings suggest that it should be taken into account when calculating holiday pay, but only when the use of voluntary overtime is regular enough that it counts as a 'normal' part of an employee's pay.

However, in most instances, voluntary overtime is not included in holiday calculations.

Solutions to common overtime problems

Having a clear overtime policy that works for your company is only half the battle. Enforcing the policy, managing the system and evaluating it are all just as important if you're to avoid overtime woes.

Problem: Our employees are dependent on the extra income from overtime.

There's no easy answer to overtime dependency. Your staff will take a big hit however you limit overtime, whether through an arbitrary cap, hiring more employees, or reducing overtime pay rates.

However, by sticking with the same system, your business will start to attract more employees who want to take copious amounts of overtime. This isn't good for your employees' health and stress levels — or your business.

If you've started to notice overtime dependency becoming a real problem at your business, it's best to act sooner rather than later. Stop incentivising long hours. Hire a part-time staff member to provide extra cover. Ensure your managers aren't pressuring staff to work extra hours on a regular basis.

Overtime-dependent employees won't be happy with these changes, but it's better for all involved if you change your overtime culture as soon as you can.

Problem: Our employees exaggerate hours on their timesheets to benefit from our paid overtime system.

There are two problems here: first, that employees exaggerate hours to benefit from generous overtime pay, and second — the timesheet and overtime approval process isn't stringent enough.

Solving the first issue requires a more reliable time tracking approach. We recommend using an electronic clocking in and out system to generate timesheets automatically. This significantly reduces incidences of "time theft".

You could also choose to pay nothing for the first 30 minutes of overtime to discourage employees from intentionally staying late on a regular basis to boost their pay.

The second issue is a little more difficult to target. You could only allow pre-approved paid overtime (via a specific form), for example. Alternatively, use a time and attendance system to automatically flag timesheet records when there's a certain discrepancy between planned and actual hours worked.

Problem: My business can't function without employees taking plenty of regular overtime — we're beginning to think this isn't sustainable.

When a business is reliant on staff regularly working through the evenings or over the weekend, it suggests that something isn't quite right. Sure, during seasonal peaks you may ask more from your staff, but if you resort to this tactic more often than not, you probably need to look at employee workload.

If you're reluctant to hire more staff, consider training staff so that they can fill multiple roles at your business. This can help you plug gaps in areas that typically struggle with workload.

Problem: We're overstaffed on some days, and understaffed on others.

You've got the staff in the roles to fulfil their workload, but they're not in the right place at the right time. This means that you're essentially paying overtime unnecessarily.

This dilemma is a result of poor employee scheduling.

You can't predict exactly when your workload will be highest, but if you're not anticipating seasonal demand (or lack of demand) and adjusting your schedule appropriately, you're placing needless stress on your staff.

If you aren't sure which shifts tend to be busiest, speak to your staff and ask them which days (or times of day) they feel most stretched. By planning your rota in advance and making seasonal adjustments as necessary, you can better spread your resources.

Time off in lieu (TOIL) can also help reduce the impact of seasonal variation in workload. It's important to place limits on TOIL accrual and when it can be taken, so that system can't be abused.

Final thoughts

Overtime, whether paid or unpaid, voluntary or guaranteed, is a powerful force for businesses which manage it effectively. Mismanaged overtime, however, causes more problems than it solves.

Managers must ensure that neither employees nor the business becomes reliant on regular overtime, as well as recognising when the system needs adjusting.

Formalising your approach to overtime protects you from disputes and reduces staff confusion. Given that most companies already have some kind of informal overtime policy in place, putting it on paper shouldn't be too taxing!

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