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Track overtime costs especially when sales are lagging. If incoming sales orders are running behind or slowly, why spend overtime? Ask this question as overtime as a percentage of payroll rises. It may need to rise if sales orders are growing faster than production can keep up. This is to be expected and necessary.
Overtime gets out of hand when managers and supervisors are lax at doing their jobs. They neglect to tell their employees that overtime is only allowed and paid if it was pre-approved. No employee works overtime without approval first.
When overtime is high with falling sales, it becomes evident that no one is watching labor costs. Employees get used to higher salaries and will not stop the extra time unless instructed to do so. Overtime has to be allowed only to meet deadlines for the customers’ behalf. No one should be able to work overtime unless it is cleared by the applicable supervisor. The supervisor should be on an incentive program tied to the bottom line.
Have your human resources/payroll function post this chart of overtime pay in dollars and as a percentage of total payrolls each pay period (weekly). Have them scan this and email it to production management for review.
