Good reasons to pay overtime, whether or not your competition does. June 6, 2001
Many of the other shops in my area are not paying any overtime. I feel that this gives them an unfair pricing advantage, especially when they employ 10-15 workers. Any suggestions? I would like to be in fair competition, but I refuse to deny my employees overtime pay.
Aside from it being unethical, it's also illegal--not paying overtime, that is. Keep doing what you're doing. Sooner or later the competition's practices will bite them on the posterior. All it takes is one disgruntled employee and a letter to the Labor Relations Board. If you do the right thing you'll be better in the long run.
How do you know for sure that they don't pay overtime? Maybe the employees are compensated in ways you are not aware of. Extra vacation days, personal days, profit sharing; they might be piece working or getting bonuses for completing jobs ahead of schedule.
If they are not doing any of these things, it will come back to haunt them. Don't waste time letting this eat at you. If you pay overtime and they don't, it should be very easy to hire away their best employees.
From the original questioner:
The reason I know is that we have hired away several of the competition's guys, and that's what they have told us.
Any chance the shops employ a large number of first generation immigrants, unfamiliar with our labor laws?
Paying overtime is not required by law. If it is a small shop (less than 250K total sales) and they deal strictly in state, ie no interstate commerce, then legally they do not need to pay overtime. I know that stinks in relation to those of us that do pay overtime, but that is the law and a smart (cheap) businessman may use it to his advantage.
I would like to find out how to motivate guys to work overtime without overtime pay. We pay time and a half over 44 hours and only the fact that our bonus plan requires it gets most of our men to the 40 hour mark. In the winter when they don't have anything better to do it isn't a problem, but in the nice weather they have lots of other things to do.
The best way I've found to motivate a group to meet demand was by identifying the daily production requirements with an established policy of completion before departure. All overtime past daily requirements was voluntary. I know it sounds wasteful, but it was certainly well worth it.
The idea of being in control even changed the hardcore "against" employees into being there on Saturdays! These were actually the guys who worked the hardest to make the plan work day in/day out.
I had to be careful, and not allow for production to be run ahead of time, though. Also, I never turned anyone down who wanted to work overtime.
A machine shop in Indiana was going bankrupt with overtime. As I remember, the accountant suggested a novel solution. Allow workers to leave after 6 hours if their work was completed, with 8 hours pay. Damn, how people can work faster with less scheduled and unscheduled breaks if it is rewarded. Productivity (product per dollar) went way up and so did morale. On those rare times when overtime was required, he paid overtime after eight hours.
We cut out scheduled overtime at the beginning of this year. Any overtime is strictly scrutinized for necessity. We finally got it. Our customers weren't paying time and a half. Productivity per man hour has increased, total payroll is down and we actually were able to raise pay rates to a competitive level for our area.