Every business has certain things in common. Every business needs a product or service to sell, and employees to do the work. Having a great product is important, but your employees are arguably the most important factor in the success of your business. Obviously, you want to pay your employee for the work, but you need to be smart with your budget. Therefore, overtime can sometimes be a thorny subject. Learning how to manage overtime is an essential skill.

The Problem of Overtime


Sometimes, overtime is unavoidable. When you need to complete more work than you can get done during regular hours. In this case, using overtime is easier than bringing in temporary help. However, sometimes overtime happens because of mistakes, or even employee fraud. This type of overtime costs businesses millions of dollars every year. According to a 2012 government audit, the United States Post Office spent more than $700 million on unauthorized overtime between 2010 and 2012.[i] You might argue that the Post Office is particularly inefficient, but even a small percentage of excess costs due to unauthorized overtime should be unacceptable. With numbers like this, eliminating unnecessary overtime should be a serious focus for
every business owner.

Steps to Reducing Overtime

According to the Bureau of Labor Statistics[ii], the average American worker works about four hours of overtime per week. The average hourly pay rate is $21. This means that the typical business pays $6,300 per employee, per year on overtime. With numbers like this, eliminating avoidable overtime should be a big focus for companies. If you are concerned with how to manage overtime, we have four tips that can help:

Track Employee Time

The first step in reducing overtime may seem obvious. Accurately tracking employee time is essential. An electronic time-tracking system is the best tool for this task. Being able to report on time spent working is valuable and should be a standard practice for both salaried and hourly employees.

Make the Rules Clear

Having the right policies in place is good, but ultimately pointless unless your employees understand the policies. Be sure to communicate the overtime policy clearly to every employee.

Use Smart Discipline

Your employees will make occasional mistakes with time tracking. However, when these mistakes become a pattern of behavior, it is your responsibility as a manager to respond. When you are forced to take disciplinary measures, start with minor penalties and progress to more severe measures only if necessary.

Cross Training Works

Every business has certain key employees that love their jobs and excel at them. These employees may face pressure to work extra hours, either on or off the clock. The best thing to do in this case is use these employees as a resource to train your other employees. Encouraging professional development is never the wrong choice.

How to manage overtime is a question that every manager should be concerned with. You can implement these steps today to help you save in costs tomorrow


[i] http://www.allgov.com/news/where-is-the-money-going/postal-service-spent-717-million-on-unauthorized-overtime-pay?news=844300

[ii] https://www.bls.gov/






Reduce your annual workload by 5 months

See how payroll automation reduces manual processing time

  • This field is for validation purposes and should be left unchanged.