Is It Less Costly To Hire Additional Employees, Or Pay Overtime?

April 5th, 2012

For any industry with overtime as part of the wage structure, managers and schedulers have to maintain a delicate balance between the available workload and the available staff. But when a company’s workload exceeds the manpower at a scheduler’s disposal, two options emerge: hire more employees, or pay overtime to current employees.

In the short-term, overtime is less costly, assuming you have qualified and willing staff willing to shoulder the extra work. Offering overtime to existing employees will add a marginal cost to operating expenses, offering a tradeoff that is outstripped by the increase in production, sales or outputs. But again, this is a short-term solution.

That overtime, though the extra income is appreciated by overtime workers, has a limit. At a certain point, employees lose their edge and you don’t see gains in productivity. In fact, research from the U.S. Department of Health and Human Services in 2011 found an array of negative effects resulting from overtime and extended work shifts related to worker illnesses, injuries and overall health. Sick workers don’t help your business meet its yearly goals. Beyond that, extended periods of overtime can make workers feel overworked and underappreciated, raising questions of why management won’t bring in more employees to handle an increased workload.

That leads to what employers can do for longer-term planning. The added expense for a new hire – from the hiring process, to training, to additional benefits and insurances – is not one to be taken lightly. But ideally, your business is growing at a rate that will support new hires over a period of time. Your personnel costs will increase, but you will also see a proportionate growth in your business.

With the cost of a new employee also comes the value of a new employee. It means you are introducing someone with a new perspective on your business and its operations. These hires can offer new ideas from within and beyond your industry. They are able to be cross-trained, adding in a layer of redundancy for times when employees are ill, on vacation or involved in a new project. And, they’re a visible reminder that your company is succeeding.

If you are in the market for new employees to support your growing business, Olympic Staffing works as your partner to outline your staffing needs and to find the right people to fill those positions. Call our office today!