#1  
Unread 08-04-2004, 04:56 AM
DMG
 
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Default Overtime vs. Additional Hire Calculation

I've been charged with Mission Impossible. We are an auto supplier located in Mich. We are non-union. I've been asked to develop a calculation to assist in determining whether overtime is appropriate or hire additional employees for production operators. I know, it depends. But, recently I read (somewhere) an article with a calculator in it regarding this process. Can anyone give me some guidance ASAP. Thanks so much.
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  #2  
Unread 08-09-2004, 11:31 AM
HRQ
 
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Default RE: Overtime vs. Additional Hire Calculation

I've never seen the article, however, one of our preschools was consistently paying 80-100 hours of overtime every pay period. (Total staff size is around 30 employees)

This indicated to me me they should just hire one or two more employees for afternoon shifts to get the opening shift folks out of there. The OT was being paid to people who came in at 6AM and "got stuck" staying late regularly.

Hope this helps!
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  #3  
Unread 08-10-2004, 01:46 AM
s moll
 
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Default RE: Overtime vs. Additional Hire Calculation

Don't fret. We'll help you make this possible. First, you won't know if the overtime is appropriate unless you know the reason for the overtime. Is it due to call outs, an especially busy season, employees 'milking' the clock, etc.? Once you determine the reason for the overtime, you can calculate the hours and the cost. If the total exceeds what you would pay an employee plus benefits, you may want to add another employee.


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  #4  
Unread 08-10-2004, 09:53 AM
marc
 
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Default RE: Overtime vs. Additional Hire Calculation

You have some good, common sense replies. I would just add that the duration of the expected OT could be a factor. If it is just for a few weeks because of an expected short term surge in sales or because of a special non-recurring order, then it might not make sense to add more people and just pay the OT. Otherwise it is a straight forward calculation comparing the cost of 40 hours and time and a half to 40 hours of straight time.
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  #5  
Unread 08-10-2004, 12:02 PM
Don D
 
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Default RE: Overtime vs. Additional Hire Calculation

Not so fast Marc. Overtime vs. a new employee factors in much more than the simple dollar cost of wages. A whole new body brings much more into the mix.
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  #6  
Unread 08-10-2004, 12:18 PM
marc
 
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Default RE: Overtime vs. Additional Hire Calculation

You are correct and with than admission I will apologize the DMG for being a bit glib with my initial response.

There are certainly other factors one should consider when adding an employee. Some of these costs come with a new employee that would not be incurred again with an existing EE.

Health insurance and other employee paid benefits that do not vary with each dollar of the paycheck are a couple of examples. These expenses are already "sunk" into the cost of the existing EE but have to be incurred all over again with the new employee. Other "soft" costs, such as the administrative burden of adding an employee to the system, providing required trainings and orientation are also new costs that an existing employee does not require.

There are different kinds of investments required with different kinds of new employees. For example, an office employee may require another desk, chair, calculator, computer, telephone, etc. and these may cause some back office charges such as expanding licensing agreements, or increased switchboard capacity for a new telephone and other hidden costs.

A warehouse guy may need tools, and a line production worker will have similar kinds of investments to make and a space in which to work. I am not familiar enough with this environment to come up with many examples, but I am certain others have good examples.
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  #7  
Unread 08-18-2004, 05:28 AM
DMG
 
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Default RE: Overtime vs. Additional Hire Calculation

Thanks for everyone's help. I had applied most of what was suggested and just needed verification. You're all great.
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