The Hidden Cost of Overtime

What Is Overtime?

Overtime often signals inefficiency—it means achieving the same output at a higher cost. While eliminating it entirely may not always be feasible, significant reductions are possible with the right strategies. The extent to which you can minimize overtime depends on your catering operations, planning tools, and the labour laws governing your region.

The key question is: How much can you reduce it, and how?

While overtime raises costs for employers, it provides extra earnings for employees, making it a complex issue to manage. Some companies compensate overtime with leave, but most employees prefer paid overtime, further complicating cost control. Managing it strategically is essential to balance financial sustainability and workforce satisfaction.

Why Does Overtime Happen?

To effectively manage overtime, it's crucial to understand what drives it in the first place. Common causes include:

1. Fluctuations in demand and unpredictable spikes

2. Skills shortages and high staff turnover rates

3. Lack of accountability in overtime approvals

4. Budget constraints and legal requirements

5. Unexpected business continuity events

6. Cost-cutting measures and labour law restrictions

7. Inefficiencies in workforce utilization

Challenges in Managing Overtime

Overtime is a slippery devil—certain patterns indicate inefficiencies or misuse:

• Consistent overtime – A sign of poor planning, occurring daily regardless of production volumes.

• Planned overtime – Sometimes used to bypass company policies that restrict direct financial rewards.

• Unverifiable overtime allocation – Difficulty in tracking or justifying overtime usage.

The solution is rarely straightforward, and tackling overtime reduction alone can be challenging. While it’s important to minimize overtime as quickly as possible, avoid rushing in with a one-size-fits-all approach. In some cases, a comparative cost analysis may reveal that overtime is actually more cost-effective than hiring additional staff, especially when full-time employees come with high fixed costs, such as allowances and benefits.

Taking Control of Overtime

Reducing overtime requires a structured approach. By identifying inefficiencies and implementing smart workforce strategies, companies can significantly cut overtime costs while maintaining productivity. Let’s explore solutions together.