By REMODELING Magazine Staff. Overtime is money
We guarantee our employees a 40-hour workweek year round and provide them with overtime opportunities almost every week. Approximately half of our field staff takes advantage of the overtime option.
I know if I didn't provide them with this opportunity, many of my employees would seek out their own side jobs to earn extra money. I'd much rather have my employees working for our company than competing against us for jobs. I do realize working more than eight hours a day may lower productivity and lead to burnout. In order to protect our productivity threshold, our company offers overtime mainly on Saturdays.
Good for everyone
Our company benefits from having our employees work overtime too. Our ability to field a crew outside the 40-hour workweek allows us to complete high profit margin jobs in an aggressive manner. It also allows us to pursue clients whose top priority is getting jobs finished quickly and who value timeliness as a commodity worth paying for.
Paying overtime rates isn't as costly as most people think. While the rate per employee is time and a half, most overhead items stay fixed, allowing for a larger volume of work with the same amount of overhead.
Overall, overtime has been a helpful tool in recruitment and retention of good employees, as well as an additional way to increase revenue for my company.
--Kevin Ahern, Litchfield Builders, Hamden, Conn., Big 50 2001
No overtime wins
In 1997, we decided to change our policy and prohibit our employees from working overtime. The result was a 4% improvement in the gross profit per job.
At the time, we were running as many as 50 projects concurrently, so it simply wasn't cost-effective or practical to have on-site supervision at all times. That allowed overtime to go almost unchecked, bringing about significant and ever-increasing labor cost overruns.
Before the policy change, the employees in the field actually had an incentive to take longer to finish their work. In essence they were writing themselves a pay raise by failing to meet their production quota. Whether this phenomenon was intentional or incidental was beside the point. It was adversely affecting our competitiveness and bottom line.
When we changed the policy, some people felt we wouldn't be able to keep jobs on schedule. Counterintuitively, we found that once overtime wasn't an option, productivity rose. Although labor cost overruns could never be eliminated in remodeling, abolishing overtime goes a long way toward that end.
When contractors are lax in enforcing strict cost controls, costs inevitably go up. In good times the lost revenue may not be fully appreciated. When times are lean, however, the effect may be devastating. So in '97 we went over everything with a fine-toothed comb to see where we could get more productivity from the same resources. We reorganized office operations, trimmed overhead, and brought in some new technology, but the easiest and most effective step we took was to prohibit overtime.
--Alon Toker, Mega Builders, Chatsworth, Calif., Big 50 1999