Overtime expenses

What are overtime expenses? Find our definition & overview below

Overtime is work performed by an employee outside of a basic workday (typically 8 hours a day, 5 days a week) or as defined by company rules, job contract, statute, or union (collective) agreement. For employers, Overtime represents additional costs. However, many companies fail to properly understand the full range of these additional costs.

Depending on the industry and workforce agreements, they can include wage increases (for example, overtime penalty rates 1.5 times for hours worked above 40 hours and 2 times over 60 hours), retirement costs and employment taxes. These are hard costs that can be measured on a balance sheet. However, there are soft costs as well. Studies have shown that employees can become less productive the more hours they work. So, while most companies will factor in the additional ‘hard’ wages costs associated with overtime, research shows that few factors in the additional soft costs, and therefore have poor visibility as to their impact on the business.