20 Metrics in 20 Days- Day 13: Overtime Pay Rate

Day 13 in our series of 20 consecutive posts on HR metrics: Overtime Pay Rate

Definition

Overtime Pay Rate is the percentage of total direct compensation from overtime pay in a given period.

Formula

Why You Should Care

• Excessive overtime pay is costly. The bottom line is that it hurts the bottom line.
• Elevated use of overtime may indicate consistently poor anticipation of labor needs or simply poor hiring and development practices that lead to chronic shortages of appropriate staff.
• Elevated use of overtime may also be a consequence of frequent worker absences or low worker productivity from high turnover.
• Non-exempt employees are particularly subject to supervisor pressures and often hesitant to say that finishing a job will require overtime. Workers may therefore simply not record the hours because they fear a reprimand. This is bad for individuals…and it’s illegal.
• In other cases, employees are “asked” to work overtime even they would prefer not to. Again, not a practice that leads to happy employees or a healthy work culture.

Actions

• Look for underlying causes of elevated overtime pay such a worker absences or high employee turnover.
• Plot your overtime pay over time including times of the day, days of the week, and months of the year. Do you see any patterns?
• Analyze the specific areas or even individuals that are requiring overtime compensation. Is there something particular about those roles or individuals?

Readings

Most of these seem to come from the same basic observations (and actually the same original post) but they are worth reading for a quick, light introduction to some of the key issues.

• Overtime: How to Lose Your Employees and Kill Your Business
• Why Overtime is Killing Your Business
  • This is also where I got the following links
• Why Crunch Mode Doesn’t Work
• Classic article about EA gaming and overtime