Overtime vs. Hiring Additional Employees
Emily L. Slaugenhoup
Butler County Community College
Today’s economy is certainly struggling. With hard times, many employers are faced with tough decisions on how to save money. One area to be considered is the number of employees, their salaries, benefits, and bonuses. A company can save money depending on whether they hire additional employees to cover shortages and additional work or by simply paying current employees overtime to get the work done. There are numerous pros and cons to both. However, there is not always a clear answer.
According to the Fair Labor Standards Act (FLSA), an employer must pay an employee overtime pay ...view middle of the document...
additional personnel in the case of the city of Riverside fire department. He found many issues associated with the dilemma including health risks, city budget issues, and department protocol. Ellen Perlman of Governing magazine stated that “overtime remains a key way of controlling staff levels to ride out revenue rollercoasters” (Perlman, 1997, p. 43). However, Earley concluded that overtime surpasses many firefighters’ salary, and this could lead to issues within the city if the firefighters become the highest paid employees. This could ultimately lead to budgeting problems when contract negotiation starts. (Earley, 2001, p. 11) Leeanna Mims, author of “Overtime Cost Reduction with Alternative Work schedules,” found that city officials are worried about an overabundance of overtime costs (Mims, 1999, p. 4). She discussed her city officials’ recommendation to switch the fire department’s schedule to twelve-hour shifts. Earley found other research that suggested ten-hour day shifts and fourteen-hour night shifts are overall more beneficial to the employees and the budget. Twenty-four-hour shifts leave firefighters fatigued and more accident-prone (Earley, 2001, p. 11). According to Mims, a twelve-hour shift reduced the cost of overtime and use of sick days and increased safety (Mims, 1999, p. 14).
Mr. Earley also included the findings of a few other researchers (Earley, 2001, p. 12). Robert Brown assessed the cost of hiring additional employees or paying overtime and found that it was 13.10% cheaper to pay overtime. He based the cost of hiring additional employees on their salary, benefits, and hiring costs (Brown, 1998, p. 9). Thomas J. O’Connell used his research to conclude that “limited and judicious use of overtime spending coupled with strategic planning, data analysis and readily retrievable information” provided the best use of finances (O'Connell, 2000, p. 30). John Selberg determined that finding the cost of variables, such as sick leave, injuries, holidays, incidents, training, unscheduled shortages, and other benefits is crucial in estimating overtime costs. In doing this, Selberg established a “breakeven point” in which the fire department should hire employees to a certain point then pay overtime for the rest. (Selberg, 1992, p. 9).
Looking at all angles of the issue, Earley found that overtime pay certainly has its disadvantages. After being used for so long, overtime can be hard to get rid of because it becomes standard routine. It also hurts employees physically and mentally after long hours, increasing the risk of incident. He even reported the findings of L. Glazner that showed “a correlation to firefighter work schedules and injuries with fatigue being associated with those injuries and mistakes of firefighters.” (Earley, 2001, p. 14) Earley had a hard time deciding the better of the two, overtime or additional personnel, after his research.
Steve Earley went on to compile his own cost research...