How Manufacturing Employers are Reducing Overtime by Better Tracking Employee Time

Nothing can kill a manufacturer’s bottom line like increased labor costs and production loss. Weighing in at a hearty 6.3% of annual payroll, overtime is one of the heaviest controllable costs carried by manufacturers.

Research shows that in an average week, manufacturers incur 4.3 hours of overtime. It adds up!

Reducing overtime’s average percentage of payroll by 1% can translate into $50,000 savings for every 100 employees. In production, the pennies matter. For manufacturers looking to maintain competitive pricing in a marketplace that has a shrinking talent pool (baby-boomers are on their way out with a much smaller Millennial generation entering), reducing unnecessary and avoidable overtime is a must.

So how are employer’s reducing overtime?

Paper time tracking means stolen time: This may be a cynical thought, but when a workforce study reveals a 537% ROI when employer’s shifted from dated employee time-tracking processes to electronic timeclocks, I doubt that the return is all tied to fat-fingering the keyboard.

The truth is that tracking employee time with paper timesheets creates an environment of poor accountability, making it all the more tempting to buddy-punch or round up to the next 15 minutes on personal time sheets. That’s 15 minutes more of direct labor costs, and 15 minutes closer to overtime.

Ditch the spreadsheets: Yes, spreadsheets are vastly better than paper records, but they don’t tell the story by themselves. They still need to be merged with other spreadsheets or manipulated through pivot analysis to help supervisors make informed decisions on assigning overtime.

Too often, supervisors don’t have the necessary data in front of them to make decisions on how to fill labor gaps without incurring overtime. The data may just need to be pulled from two or three spreadsheets, but in the words of my favorite YouTube star, “Ain’t nobody got time for dat!”

Integrated Scheduling and Time Tracking: When scheduling software does not integrate with employee time-tracking systems, then supervisors have to cross reference timesheets with availability before assigning employees to labor gaps. This adds another layer of complexity to shift-assignment.

When scheduling tools can access real-time hours information for employees, then system triggers can be set to inform supervisors immediately if they are assigning overtime, and notify managers when overtime is being assigned.

Employee Self-Service Shift Review: When employees are able to view shifts through mobile or self-service portals before they are finalized to either decline shifts or pick-up extra hours, employers often experience a faster turn-around on shift creation and reduction in unexpected absenteeism.

Organizations with automated scheduling tools are 10x more likely to automatically notify employees of open shifts by text, phone, or email.

Reducing Unplanned Absenteeism:

Unplanned absenteeism can quickly cause a ripple effect throughout a production floor. Nearly 47% of the time, supervisors respond to an unplanned absence by assigning overtime. In the 21% of the time that organizations do nothing in response to an absent employee they lose a whopping 14% of productivity. According to Aberdeen, line-managers spend 1.7 hours per week on absence tasks.

Develop a workplace culture that is intolerant of unnecessary overtime: There are a number of experiences that can be incorporated into a production environment to hold people accountable to reducing overtime costs and maintaining integrity with employee time-tracking. That being said, it will never happen without the correct leadership in place.

One study showed that paper time-tracking inflated payroll by up to 7%.

Employers can achieve some immediate returns by making the shift from paper timesheets to electronic timeclocks and databases, but a true culture of accountability demands retraining supervisors and managers on how to make cost-conscious decisions with accessible data.

Related Blog: How Mid-Market Employers are Reducing Overtime Costs