What’s More Expensive: Overtime or Temporary Employees?

Companies that suddenly see a big increase in demand are confronted with a tough decision.

On one hand, using overtime pay to leverage current full-time staff members is a good way to meet demand while offering added pay to those who want it. Additionally, hiring temporary employees can lower the burden on your full-time workforce and is a good way to improve productivity without impacting the long-term performance of full-time staffers.

The next time your company is confronted with such a decision, consider the following factors in order to make sure that you are doing the right thing for your business.

What is considered “overtime”?

By federal law, an employer is mandated to pay employees overtime pay for any hours that are worked beyond 40 hours inside the span of a seven-day work week. This law applies to both full-time and contracted employees. Current law also states that overtime pay must equal one-and-a-half times that of the worker’s regular rate. Considering these regulations, it’s easy to see how temporary employees can be useful in skirting the costs associated with overtime.

However, some full-time staff members may take exception to the hiring of temporary staff. They may take the move as a sign that they are not meeting the expectations of their job, and their morale may decline as a result. Moreover, full-time staff members who are ready and willing to take on more hours may feel that they are failing to get the pay they deserve.

When contemplating a temporary staffing solution, some companies can even incorporate their established workforce into the decision making process. Department meetings and business newsletters are great tools for requesting feedback from permanent staff.

Pros and cons of temporary staff

The productive use of temporary employees is a good way to tamp down overall labor costs, particularly with respect to overtime. However, there are some disadvantages connected with the use of temp workers. An inherent lack of worker commitment and the potential for temporary employees to effectively incorporate into your business can both impact productivity and bottom line of your business. Such possibilities must be taken into consideration when trying to choose between overtime pay and the utilization of contingent employees.

Calculating the costs

In the end, an employer must calculate and contrast the costs of having employees work overtime against the use of temporary staff members. Due to the varied nature of the manufacturing industry, along with the problems connected with the general workforce today, it’s extremely hard to take all of the various factors that may impact the bottom line into consideration. Hence, a staffing solution that works for one company may not necessarily be appropriate for another employer.

At Labor Temps, we regularly consult with companies considering the use of a temporary staffing solution to point them in the direction of an approach that best suits their current situation. If your company is considering the use of contract workers, please contact us today.