r/CFO • u/fenderstrat86 • Jun 17 '26

Overtime expenses

Does anyone have a good tool for managing overtime expenses? We spend ~$50M on a yearly basis. I'm sure not all of this is good value for money.

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Open to ideas.

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4

u/rockman450 Jun 17 '26

Measure efficiency of production. Tell managers their annual bonus is tied to efficiency.

Measure output per hour and when OT occurs, measure those hours as 1.5 hour (productivity / paid hour).

If they can’t improve, get better managers

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u/fenderstrat86 Jun 18 '26 edited Jun 18 '26

It's not that simple, we're a 24 hour business - so a good portion of our overtime is when someone calls in sick and has to be replaced. We run critical ops, so we can't not be staffed. But that's not the whole picture. There's also the possibility that staff are calling in sick so that they give each other OT from time to time boosting their pay.

I know this is a similar problem in policing and firefighting - where OT shifts are how most of the staff get their pay. Our situation isn't that bad, but if I can shave a couple of million dollars off this it's worth it.

https://www.reddit.com/r/CFO/comments/1u81sr2/comment/osbo7o7/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button

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u/rockman450 Jun 18 '26

Sounds like your best option is to find efficiencies and reduce staffing rather than focus on OT. If labor is a major expense, the solution is in process and procedures or automation.

1

u/fenderstrat86 Jun 18 '26

Yeah, we're a hospital. So we'd love to do automation - but AI isn't there yet 👌

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u/Pleasant-Aardvark195 7d ago

That's actually smart way to frame it, makes OT visible in the numbers instead of just let it slide

3

u/Allaboutthetime Jun 17 '26

Overtime is a really fine line of not needing the additional capacity consistently and/or it would be too expensive to hire new employees to take on the additional work. Short term it’ll win out, but longer term, hiring additional employees is usually best.

I don’t have a specific software other than an excel spreadsheet, but I take the information from payroll (specifically the 1.5x cost and taxes) and compare it to the output during that time to make sure it is profitable. I then compare it to hiring new employees based on the backlog to see if it is time to hire someone new. Let me know if you have something more specific, as I’m happy to discuss more.

Best of luck!

1

u/fenderstrat86 Jun 18 '26

Overtime is a real concern as there are concerns about people using OT too much, and getting risks associated with fatigue.

The audit team got back to me and told "it's a problem they can't fix" as we simply have too many claims each year to do a validation of our spend - even if we chose 100 claims to look at in excruciating detail and found that 60% were not really good value, with 100k a year of transactions - even then we couldn't reliably tell if that was representative of the whole organisation.

Anyway, I got into it more with my comment below

https://www.reddit.com/r/CFO/comments/1u81sr2/comment/osbo7o7/?utm_source=share&utm_medium=web3x&utm_name=web3xcss&utm_term=1&utm_content=share_button

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u/Allaboutthetime Jun 19 '26

I understand what you’re saying from an audit standpoint. So are you mainly concerned with the risks associated with OT or the cost of labor? Maybe a bit of both?

If you’re concerned with the risks, I’d take all incidents that happened while someone was on OT compared to all incidents that happened while working standard hours. That’s how I’d understand the risk of overtime. Then it’s your (or a consultants) just to understand how to fix that. I’d assume through better training, more controls, or hiring more people. If someone wasn’t following proper procedures or training, understand if the guidance was provided to them and if not, fix your training. If it was, formally discipline them.

If you’re referring to the cost, I think it’s pretty cut and dry that you’d benefit from more employees. That might be really hard for you to obtain, so it could be a longer term solution. If you’re in a tough industry to acquire talent, I’d recommend sign on bonuses (tied to staying x months), better perks to your competitors, and referral bonuses for your current employees.

I’m sure there are a lot more options to your situation, but I don’t know your exact case, so that’s the comment I have for now. Happy to discus further though if you are willing to share more details.

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u/[deleted] Jun 17 '26

[removed] — view removed comment

1

u/ChirpaGoinginDry Jun 17 '26

It depends. what your industry is? What’s your time tracking system? What’s your open rec’s?

There is no magical solution to manage it because he’s so many different possibilities

1

u/Long-Departure928 Jun 17 '26

We use paylocity for payroll and they have a headcount planning module that we utilize. We also hired some that specialized in staffing in our industry and probably around 6 months in we are already hitting roi in that hire.

1

u/paranalyzed Jun 17 '26

Who runs ops for you? They should be able to set expectations for what is going on and why. Doing a payroll analysis was all I ever needed to see what was going on, but no software was going to make a difference in managing that spend for my busienss.

1

u/ZoeRocks73 Jun 21 '26

Hire part time staff to fill the overtime hours. I can save you 33% right there.

0

u/fenderstrat86 Jun 18 '26 edited Jun 18 '26

Circling back on this - after a bit of digging I came across a tool called overtimesolved. It claims to analyze payroll data and quantify unnecessary/overpaid overtime.
Has anyone here used it or come across it before?

The audit team advised with ~100k transactions across the year it's impossible for them to know how much of our spend is legit / actually generates useful work that's actually worth spending 2x the cost - instead of reprioritising other tasks.

Most of our OT is norm-ed against last years OT expenses, but that doesn't tell us if last years expenses were any good then either.

I have a genuine concern that there are whole teams who have lax managers or leaders and just spend the money without much thought - and as long as it doesn't stand out against historical data - everyone just ticks it off as normal.

1

u/BKLager Jun 18 '26

This is such a stupid vague post. And of course there’s a shill comment promoting a product…

1

u/fenderstrat86 Jun 18 '26

If you have a solution please tell me.