Management is typically so focused on minimizing overtime that they
encourage something far worse, idle time. The #1 profit killer of any labor based
organization is idle time. When an employee is idle, the company is paying for
his or her wages plus benefits, but no work is done. On the other hand, when a
company is required to use overtime, the employee is paid his wage at a 1.5
rate, but many of his full-time benefits are not paid again on overtime. For
example, you don’t get extra health benefits, just because you work overtime.

The following example of a mid-western company is quite common. They were
paying $15 in average wages plus 90% in benefits totaling $28.50 per hour.
Overtime costs were the $15 average wage at an 1.5 overtime rate times a 30%
benefit rate equaling $29.25. The result of these financial truths is that the risk
of using idle time was $28.50 but the risk of using overtime was only 75 cents.
Typically, the cost of idle time is 10 to15 times more expensive than overtime.

Our consultants are experts at developing and implementing labor strategies
that help you capture millions of dollars in hidden labor costs, while improving
employee morale. Contact us at Operationsmanagement@corepractice.com to
learn more or call 1-866-663-7056.