How to manage overtime

Overtime is not only considered one of the biggest ongoing expenses for companies, but if managed incorrectly it can also mean expensive lawsuits, low morale, and even abuse of company time and money.

It is one of the most contentious issues in the labour market. 

Sometimes managers expect workers to be available at all hours and workers often resent doing overtime, especially if it is for reasons beyond their control. 

Amy Bailey, who is in charge of finance and human resources at the US company TSheets, says in difficult economic times employees have been eager to prove themselves as hard workers who do not mind working a little longer – without necessarily including some or all of those extra hours on their timesheets.

“And many employers have either tacitly or explicitly endorsed this attitude. However, businesses should not see this type of behaviour as a good thing,” she says in an online article published by TheBalance.com. 

Turning a blind eye or encouraging this type of behaviour can have disastrous financial repercussions should those same employees decide to pursue legal action for misclassification or time worked without pay, says Bailey.

Anastasia Vatalides, head of Werksmans Attorneys’ labour and employment practice, says that in South Africa there has been limited litigation in terms of the Basic Conditions of Employment Act, which regulates overtime.

Who should get paid for overtime?

Vatalides says in terms of the act certain categories of employees could be required to work overtime, but would not be entitled to payment for the additional hours they put in. 

The number of overtime hours allowed – without compensation – is limitless. 

Those who do not qualify to be paid overtime include:

- Senior managerial employees – they have the power to hire and fire people;

- Employees who travel, like sales representatives;

- Employees who work less than 24 hours a month; and

- Employees who earn more than the annual turnover threshold of R205 433.30 (R17 119.42 per month). 

People who are paid for overtime are those earning less than the annual turnover threshold. 

However, the overtime is limited to 10 hours per week. Quite ironic, says Vatalides, since this means that lower-paid employees have a limit to the amount of extra income they could earn.

Employers must have a provision or agreement in the employment contract stipulating that overtime will be required from employees. 

If it is not stipulated, employees can justifiably refuse to work extra hours.

“We also advise that even if there is a requirement to work overtime, employees should not be allowed to work overtime as and when they please. 

A company should only be paying for overtime work in circumstances where the employer has approved it.”

Vatalides says if the overtime goes beyond 10 hours a week it must be done with the permission or special arrangement of the employer or the union.

In tough economic times people are tempted to push for more overtime in order to make ends meet, but there are also those who stretch the envelope simply to benefit financially.

How to manage overtime: 

Circadian, a company providing solutions for businesses that operate around the clock, offers some guidance. Watch out for “overtime hogs”. 

It is not uncommon for companies to have 20% of their employees working 80% of the overtime. Its advice is to set an “annual cap” to prevent “excessive overtime cycles”. 

Vatalides says the employer must be vigilant about how people are working. “Are managers actually encouraging people to work overtime by not managing the performance during working hours? 

It is expensive if you pay people overtime for work that might have been done during working hours.” 

Many companies only offer access to the internet and social media on company devices and on company IT systems to those who need it for work-related matters. 

“These are mechanisms that employers can use, must use and do use to monitor the conduct and behaviour of employees whom they cannot specifically see all the time.”

Bailey suggests tracking employees’ time. The average American worker, according to the Bureau of Labor Statistics, works slightly more than four hours of overtime per week. Expectations must be clearly communicated. 

It is also essential to cross-train teams to spread the burden when there is an overload, or in case of emergencies. 

TSheets has developed software that allows employees to clock in and out on their desktops, laptops, or mobile phones using smartphone applications.

How to detect abuse:

Companies have to reasonably accommodate personal circumstances. “You cannot expect people not to make personal phone calls, visit a doctor or a dentist or their bank, or tend to a sick child,” says Vatalides. 

“Companies take the abuse of overtime quite seriously because it is a huge expense. The law determines that overtime be paid at 1.5 times or double the rate.”

If that is being abused, it is tantamount to theft. “You are getting a financial benefit out of lying to your employer,” says Vatalides. 

Effect of abuse:

Despite the economic consequences of overtime abuse, it can also affect morale in the company. Efficient workers may feel that their efficiency is not rewarded.

“They are being paid less than those who are breezing through the day with long lunches and coffee breaks. 

It is not always deliberate, but it could demotivate efficient workers and encourage a culture of milking the system,” she explains.

Overtime should be the exception rather than the rule. 

If a company’s employees are continuously and justifiably working more than 10 hours of overtime a week, it is indicative of a staff shortage.

How to prevent abuse:

Yolandi Esterhuizen, compliance manager at Sage, says the reward for an employee must be the task and not the hours. 

If the only incentive offered by the company is overtime, then very little will prevent employees from abusing the system.

The normal working hours must be clearly stated in the contract, so that employees have no doubt about the hours that are required before overtime will be allowed. Companies must ensure their performance management policies are up to date, and review the output with the amount of hours regularly.

“All overtime must be approved before the overtime is allowed. It is expensive. There must be additional value for the business when overtime is requested,” says Esterhuizen.

This article originally appeared in the 2 November edition of finweek. Buy and download the magazine here.