Time for a change? Three ways to improve your overtime process
Mention the word ‘overtime’ to ten different colleagues and you’ll probably get ten different reactions.
For many employees, overtime is viewed positively: a convenient way to earn a bit of extra cash, a vital lifeline to help pay the bills in uncertain economic times, or even a way to work with more flexibility and independence. But to others, it can feel like an unnecessary burden that impinges on their free time, disrupts their work/life balance, and impacts their health and productivity.
But in any case, overtime is an integral part of how most businesses operate. And whatever the perception of overtime within your specific working environment, it’s critical to ensure that it’s managed and organized properly, in order to avoid low morale, non-compliance with regulations, and damage to company culture.
So what can you do to create an approach to overtime that rewards, motivates, and empowers your workforce, both financially and mentally? These three tips can help guide the way.
Create an overtime policy
The ideal starting point is to create an overarching policy around overtime, which takes into consideration who can work extra, when, for how long, and how much they are paid for doing so. A policy ensures that arrangements are clear for all parties, while minimizing any future disagreements – setting out a framework that can be used to resolve potential disputes or issues that could arise later. Workable, the online recruitment platform, has created a helpful template. It’s a good place to start if you’re looking to create your own policy.
If your company operates internationally, then your global policy should also account for the overtime rules and regulations in each territory. As these examples demonstrate, the differences from one country to another can be substantial:
- In the United States, all work over the standard 40 hours per week must be paid at a minimum of 150 percent of the employee’s usual rate
- In Japan, where long working hours are commonplace, the rates are 125 percent for the first 60 hours of overtime per month, and 150 percent thereafter
- In India, employees are not allowed to work more than two hours of overtime per day, and employers who break working time laws can be punished with up to two years in prison
Check out our handy country guides: understanding payroll in APAC, EMEA and the Americas.
Adopt earned wage access
On-demand pay, also known as earned wage access, is a new trend where employees can accrue wages and overtime pay in real-time, using an app to withdraw it whenever they need. This not only gives employees more flexibility around their personal finances, but can also provide vital support when an employee is suddenly hit by an unexpected payment.
In legacy systems, some employees won’t receive their overtime pay until the end of the following month, meaning a wait of six weeks or more. Earned wage access, on the other hand, gives them immediate access to their earnings, helping to empower employees to work more overtime and to feel more positive about doing so.
The adoption rate of on-demand pay has accelerated significantly over the course of the pandemic. Where shortcomings in corporate payroll strategies have been exposed, businesses have turned to on-demand pay and other pay-related innovations. Kelley Rousayne, Global Payroll and Workforce Management Advisory Practice Leader at The Hackett Group, pointed out in our recent Payday podcast that employers benefit from earned wage access just as much as employees do: “It's also helping a lot of companies with their inquiries, increasing their electronic pay, and providing those pay stubs for employees. I expect that we're going to continue to see [more on-demand pay] in the US and it will start growing internationally as well.”
Use time-tracking software & analytics
Overtime needs careful management so that the benefits of the extra work aren’t negated by knock-on effects elsewhere. With the right data at your fingertips, you can look at overtime in a more granular way to understand the cause and effect. For example, has the overworked employee who has been signed off with stress been taking too much overtime? Are workers in one particular country keener to take overtime than those in another for a particular reason?
Getting answers to these questions can show the way to establishing an overtime model that works for everyone, while also helping you adapt your policy. The way to get those answers is to use time-tracking software, which can monitor the hours each employee works – including overtime – and use analytical tools to highlight cases where employees may be working too much. Analytical software can also help you understand the true cost of overtime to your business, and whether you’re really getting the additional productivity and return on investment that you hope to get from the extra time worked.
CloudPay’s global payroll platform incorporates powerful analytics functionality, helping inform your overtime strategy, ensuring it makes sense for both you and your international workforce. Take a closer look at our global payroll and treasury solutions here.