Since the goal of any business is to increase profit while decreasing costs, controlling the costs of staffing is vital. However, sometimes project demands and deadlines make it necessary for a company to pay overtime to hourly employees – driving up costs. If your HR team is growing concerned over the increased use of overtime, it may be time to start hiring additional help.
Let’s first examine why your company is running into increased overtime, to determine the best course of action.
What are your actual staffing needs?
Before hiring new employees, it’s important to understand why you may need more people on board. Is the demand for more personnel as a result of a seasonal, temporary, or permanent need? You could just need to hire some temporary or seasonal workers to handle the extra work for a short time. Or you may be growing as a company and need to hire a strong permanent team. Take the time to determine what your staffing needs are for the next 3, 6, and 12 months to come up with a base financial plan for the company.
Compare the costs with some simple math
While there will be different job types and hourly wages, it’s possible to compare the costs of overtime vs. hiring new people using some easy math. To calculate these costs, choose a single job type that you are considering hiring for and calculate the annual salary. Add to this the recruitment costs, onboarding and training fees, and any benefits you will offer. Now, compare the total compensation of a single employee to the annual cost of overtime that this person may be working over 40 hours per week (add the overtime to the regular annual rate). See the difference?
Employee A: Works 40 hours per week, with 12 weeks working overtime by 5 hours
Regular compensation: $44,000 per year plus overtime $1,980 = $45,980.
Employee B: New recruit, salary will be $44,000 per year, with $5,000 upfront recruitment and training costs = $49,000
That’s a difference of $3,020 and then if overtime is needed, the costs are even higher!
The Smarter Choice – Hiring Temporary Workers
The decision to hire temporary employees can be a smart one, among other benefits, and it’s what drives many companies to go this route is the ability to reduce overtime costs. When trying to staff responsibly and reduce overtime, temporary staffing can be a better option. Why? There are several reasons, including:
- No upfront recruitment costs (advertisement, administrative, background checks, etc.)
- Benefits and payroll are managed by the staffing agency
- Overtime costs are absorbed by the staffing agency since you get a flat hourly rate for worktime
- Increased productivity sooner because the temp worker has proven skills and observed by the staffing agency
So, you can see that hiring temps makes the best business sense, and it can save your company a great deal of aggravation and worry over staffing budgets.