What Costs More – Overtime or Additional Help?

Most companies make an effort to try and control staffing costs in order to get the highest return on investment. Unfortunately, sometimes the work necessitates extending work hours of hourly employees. When this happens, the company may face higher than normal overtime costs. If your company is concerned with the rising use of overtime, you may be wondering if bringing in additional help can reduce these expenses?

The simple answer is, “Yes”. To explain further, let’s take a look at how bringing in additional help can support a more balanced staffing budget.

Determine your actual staffing needs

Before you start hiring additional people, you’ll want to understand the reasons for the increased need of workers. This demand may be temporary, seasonal, or permanent. For example, if you are in experiencing a sudden increase in the number of orders placed by customers could it be because of a new product line? Or is the surge as a result of a temporary trend or a busy season? Consider if the increased need for staff will fall back to normal levels in a few weeks or months, or if you anticipate a study increase.

Do the comparison math

Each job can and will differ, but it is possible to conduct a mathematical comparison of overtime vs. temporary staffers. To do this, choose a job type and calculate the actual annual cost of a new hire. Be sure to include the annual salary, recruitment costs, on boarding and training fees, as well as benefits for this new hire. Now compare this total with the annual cost of overtime for each hourly employee who will work 40+ hours during the peak season or project. Remember each person will provide the same tasks.

To calculate the cost of hiring a temp employee, calculate the annual cost of the new hire at the temporary services rate sans the overtime costs. Also subtract the cost of benefits and recruitment these because the agency will take care of this for you at no additional cost. Subtract the temporary employee total from the overtime employee total to get an idea of the savings. This is the savings for each temporary employee that you bring on instead of paying for overtime.

Performance factors to consider

Outside of the math, there are some other things to consider when deciding between paying overtime and hiring temps. When employees are forced to work more than 40 hours on a regular basis, this can lead to an overall drop in morale, productivity, and employee engagement. In other words, the employees that you have currently may be dealing with the stress and overwhelm of having to take on extra work all the time. Left unchecked, this can cause employee absenteeism, turnover and even more workplace injuries. When you hire temps you have fresh people on board who are willing to work hard to maintain productivity levels without risking your best people.

Give a staffing agency a call today and let them help you better manage your staffing costs through a custom temporary staffing plan.





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