November 24, 2003—US employers are pushing employees to work longer hours, with overtime levels among workers in extended hours operations rising to an average of 12.6% above the standard 40-hour work week for the first eight months of 2003 compared with 11.9% for the same period last year. Average overtime rates reported by economists and companies are misleading because 20% of workers are putting in 60% of the overtime hours worked, according to a report published today by Circadian Technologies, Inc.
“Rather than hiring people back as the economy improves and demand picks up, employers are relying on fewer people to put in more time to get the job done. At many organizations with extended hours operations, some employees are at or beyond the point at which long hours will negatively impact productivity, health, and safety,” said Alex Kerin, Ph.D., author of the Circadian report, Overtime in Extended Hours Operations: Benefits, Costs, Risks and Liabilities. Reasonable levels of overtime—in the 10-12% range depending on the nature of the operation—are positive, Kerin said, giving employers flexibility to meet fluctuating demand and employees an opportunity to earn extra pay. “But many operations have employees whose work hours far exceeded this limit. Excessive overtime ultimately results in lower productivity, more fatigue-related accidents and injuries, costly increases in absenteeism and turnover, and higher employer medical costs,” Kerin said. “It also increases the chances of a mistake or accident that could severely damage brand image and financial performance.”
The Circadian report is based on a 2003 survey of approximately 550 US businesses and institutions running beyond the hours of 7 a.m. to 7 p.m. The researchers found that:
- Industries with the highest average levels of overtime were utilities (14.9%); processing, which includes continuous processing operations such as chemical plants, oil refineries and food processors (14.4%); services (13.1%); and manufacturing (12.4%).
- Those with the lowest overtime rates were health care (10.8%) and transportation (9.6%).
- Average overtime rates also varied according to region, with Pacific and Southern states having the highest rates (13.7% and 13.5%, respectively).
- Regions with the lowest average overtime levels were the Midwest (12.1%) and the Southeast (11.5%).
Developed for facilities and human resource managers and general counsels for extended hour or 24/7 operations, the report provides examples of a mathematical model that helps determine, based on average overtime rates, the “cross-over point” at which it becomes more cost-effective to hire additional employees rather than rely on existing staff to put in more hours. Key variables include whether employees work on a salaried or hourly basis, wage and benefit levels, training and recruiting costs, and the potential costs and risks of fatigue-related accidents.
At white-collar operations employing specialized, generally higher paid salaried workers, for example, the cross-over point is when a unit reaches an overtime rate of 15%, or an average of 46 hours per week per full-time employee. Kerin cautions that these are hypothetical guidelines only.
Kerin encourages employers to contain the direct and indirect costs associated with excessive overtime by taking several measures. These include addressing problems that may cause unscheduled employee absences; making sure that staffing levels are appropriate and meet varying demand through the day, week, month and year; reviewing policies and procedures to ensure that they do not encourage excessive overtime; and increasing productivity during the regular work week, minimizing the need for overtime to meet demand.
An executive summary of Overtime in Extended Hours Operations: Benefits, Costs, Risks and Liabilities can be obtained by contacting Tracy Maddaloni at 781/676-6924. For more information, visit Circadian Technologies.
