Small business needs to continually review its labour costs to ensure they are getting the best results for their net profit

We are often asked should we allow overtime or employ more people?

Using overtime for times of high activity within your business can be great for short-term results

Often the need for overtime arises when there are seasonal fluctuations in production and sales. Using labour overtime can help generate sales and ultimately more profits but comes at a cost!

It also means that utilising labour overtime at peak times means you are not adding to your permanent staff numbers to satisfy a short-term problem. Overtime can provide flexibility during special projects and periodic peak work periods.

However, over time as a standard operating procedure, while appearing to be less expensive than hiring more people, is usually a not recommended long-term management policy.

Too much overtime expenses can negatively impact on employee morale, health and safety and the bottom line. It also can lead to increased turnover.

No matter how much over time you may wish to use its best to communicate with employees to make ensure that it’s accomplishing your goals without hurting staff morale and providing that where possible labour time planning implemented for better production. Many small businesses prepare production well in advance to eliminate or reduce the need for overtime when they know they need additional products made.

Happy to discuss further if you are trying to manage over time. Contact Geoff on 95979966

 

About Geoff Gartly

Geoff has been assisting businesses with their taxation and business affairs for many years. His practical advice has assisted his clients to grow their businesses and plan their financial future. To contact Geoff please call 039597 9966