For a lot of people the opportunity to work overtime is exciting, seeing nothing but the extra dollars but while occasionally it can be useful (for both their additional savings and the productivity), excessive overtime can create some serious issues.
It is important to remember that there can sometimes be a hidden cost, namely;
Increased Health problems - Working extended hours can take a toll on one’s mental and physical health, if continued for long periods of time. High blood pressure, headaches, diabetes, depression and anxiety, obesity, are just some of the health problems that are caused by stress.
Increased safety risk - When working excessive overtime, workers are generally tired which can impair performance and lower attention. This raises the risk of accidents and injuries occurring in the workplace, as a result of exhaustion and errors.
Decreased Productivity - Studies and reports suggest that productivity can suffer with increased hours. In white-collar jobs, performance decreases by as much as 25% when 60 or more hours are worked in a week.
Increased Absenteeism - Excessive overtime can lead to absenteeism, as a result of poor health, fatigue, or people simply needing to take time off. Absences often need to be covered by replacement employees, often working long hours themselves, making the problem self-perpetuating.
Increased Turnover rates - Follows that another adverse effect of excessive absenteeism will be increased turnover, as the lack of work-life balance and fatigue resulting from excessive overtime finally catch up with some employees. Again, as with absenteeism, companies with high turnover are also likely to have high overtime, as employees must work to make up for vacant positions if demand is to be met.
Budget Dependency - If you are working overtime regularly, it is likely you will begin to rely on this additional income and let your expenses creep up to match it. This can be a problem. While there may be plenty of overtime available at the moment, the situation can change with little notice and so, too, will your finances.
What is deemed excessive overtime?
Overtime is when an employee works extra time. It can include work done:
- beyond their ordinary hours of work
- outside the agreed number of hours
- outside the spread of ordinary hours (the times of the day ordinary hours can be worked)
Most employee contracts will enable the employer to request that an employee works reasonable overtime. Overtime can be reasonable so long as the following things are taken into account:
- any risk to health and safety from working the extra hours
- the employee’s personal situation, including their family responsibilities
- the needs of the workplace
- if the employee is entitled to receive overtime payments or penalty rates for working the extra hours
- if they are paid at a higher rate on the understanding that they work some overtime
- if the employee was given enough notice that they may have to work overtime
- if the employee has already stated they can’t ever work overtime
- the usual patterns of work in the industry.
An employee can refuse to work overtime, if the request is unreasonable.
The Employment Relations Act 2000 has no provisions relating to overtime but employers can require employees to work overtime if that is provided in their employment agreement. If not, employers may ask employees to work beyond their normal hours – but the employees must not be subject to any penalty or disadvantage if they say no. The employment agreement generally establishes whether overtime work is obligatory or not, but employees do not have a right to elect to work overtime (it can be worked only when required by the employer). In short, overtime is governed by the contract between the employer and the employee.
For a number of industries, an award, enterprise agreement or other registered agreement will set out when overtime rates apply.
Just remember, when requesting that your people to work overtime, that there can often be a number of hidden costs that can far outweigh the perceived benefits that at first, it might appear to provide.
Gabrielle Cook has over 20+ years of industry experience and is the National People & Culture Manager at Gallagher Bassett. You can find her on LinkedIn.