Business Ideas

8 ways to reduce overtime pay

introduction

Employees are the biggest asset of any company, but they are also usually the highest cost. In fact, in some companies, labor costs account for 70% of the total cost, and overtime plays a significant role in this. This is why it is so essential to the success of a business, especially in South Africa, to manage overtime. Controlling overtime reduces expenses, helps companies avoid costly laws, boosts employee morale and keeps business legally compliant.

The ins and outs of overtime policy in South Africa

In order to understand the impact of overtime and what is prescribed as legislation on overtime in South Africa, we first need to define overtime and overtime pay.

In simple words, overtime refers to the number of hours worked by an employee that exceeds their normal working hours per day in South Africa. Overtime also refers to the employee’s remuneration for extra hours, which is the rate of overtime in South Africa. Overtime rates often vary between companies, as do the number of overtime hours worked, but standard overtime rates include one-and-a-half and double the time for typical overtime terms.

in South Africa, overtime rules The Basic Conditions of Employment Act (BCEA) is set out. Under the Act, employees can work a maximum of 45 hours a week (excluding lunch hours) at their standard pay rate, which is 9 hours per day for a 5-day work week and a day for a work week. 8 hours is more than five days. , Overtime only applies if an employee works more than 45 hours per week.

Overtime is enforced under the following conditions:

  • Employees can work a maximum of 3 hours of overtime per day or 10 hours in a week.
  • Overtime rates for Sundays and public holidays are paid at 1.5x the normal rate and 2x the normal rate.
  • Overtime pay is subject to annual income limits R224 080.48,
  • All overtime is voluntary and can only be worked under an agreement between the employer and the employee. Employers cannot force their employees to work overtime. It is often asked whether an employer can refuse to pay overtime? And the answer is no. But an employee can refuse to work overtime in South Africa.
  • Senior management employees do not receive overtime pay, nor do employees who work less than 24 hours a month for their employer or employees who control their hours (eg traveling salespeople).

How to calculate overtime pay in South Africa?

With regard to the overtime calculator in South Africa, the legal requirement for calculating overtime pay is 1.5 times the normal pay rate. To Calculate overtime pay, giving you hourly overtime pay, you will need to pay the employee’s hourly wage and pay it up to 150% of the time. For example, if an employee receives R10000 per month and works 220 hours, his hourly wage is R55.55; In this way his overtime rate will be R83.33. This is prescribed in the BCEA overtime rules.

Overtime rates are slightly different for weekends and holidays. On these specific days, employees are paid twice their normal salary. For example, if an employee is paid R10,000 monthly for working 220 hours, the hourly pay rate is R55.55. If overtime occurs on weekends or holidays, this employee will be required to pay R111.10 per hour for each hour of overtime worked.

overtime pay

8 Tips to Reduce Overtime Pay

From the above, it’s clear that this can have a significant impact on your business and revenue over time, primarily due to the number of different BCEA overtime hours regulations and legal compliance. Many companies are unsure about how to reduce overtime pay, which is why we’ve put together the tips below. These eight tips will help your company avoid the most common pitfalls, expenses and unwanted surprises.

#1: Make sure you have overtime policies in place.

An overtime policy, clarified regularly to employees, will protect the business and your employees and, as long as it is taken seriously by management, should play a part in reducing costs. Make sure your policy is compliant with the Basic Terms of Employment Act overtime regulations and the correct overtime rates for South Africa.

It should be prescribed at least the following:

  • The labor law on working hours in SA has a relation to how many hours full time is, so that employees can know when the clock works overtime.
  • Standard and maximum working hours per week for all categories of employees.
  • Overtime law in relation to legal working hours in South Africa.
  • Overtime not paid.
  • Regular rate of pay definitions that are in line with labor law overtime pay rules.
  • What are considered extra hours in the context of labor law overtime.
  • What is classified as double time in relation to the working hours of South African labor law.

#2: Use the Scheduling Tool

Often, overtime pay can be avoided. For example, when the schedule changes.

Let’s be clear: Life happens, and accidents and sick days cannot be avoided. When this happens, employees need to swap a shift, and their managers often don’t have the time or equipment to find replacements, resulting in too many hours for some employees.

However, an automated employee scheduling tool provides an easy way to determine which employees are available, whether their skill set is a match, and how close they are to overtime. All this can be done within a few seconds, and overtime payments can be avoided.

excel-timesheet-template-free-download

#3: Be careful with resource allocation

To cut overtime pay, managers need to become good at allocating resources to ensure the quality of work, while at the same time taking into account things like constraints and dependencies. For example, if a team member calls in sick, the manager should have the ability to consider how that person’s absence will affect the quality of work.

We already know that change will happen, but maintaining quality depends on how that change is handled and how employees are allocated.

The most efficient way to allocate resources is by using the right scheduling software like Easyroster.

overtime pay

#4: Use reports to uncover incorrect rostering and attendance

The reports generated by the rostering tool can keep the management top-notch. They can uncover incorrect rostering and attendance with respect to the number and grades of personnel assigned at a site as well as estimated and actual wage costs, overtime, non-productive time, site profitability, etc.

When management monitors scheduling with a “lesson learned” focus, they will find ways to improve rostering and cut unnecessary costs.

#5: Track Time by the Minute Instead of Rounding

If employees manage their timesheets, how do you know how much time is being completed? Reaching the nearest 15-minute mark can mean higher pay for labor, as well as decreased productivity, and higher overtime pay costs.

Round Up also fosters poor punctuality habits of arriving late, leaving early, and taking little breaks. It is best to remove the round up rule or implement an automatic overtime clock solution that records minute by minute and leaves no room for human justification or error.

overtime pay

#6: Automaton Alert

An easy way to keep up with overtime pay is to have supervisors receive a daily automated email that provides the employee with punch-in time.

This makes it easier for them to keep things on top, and if they notice that someone is regularly working a few minutes more than their allotted hours per day, they can take appropriate action.

#7: Encourage Cross-Training Where Possible

Reduce overtime pay by training employees to work for multiple positions.

This will allow management to easily reallocate employees in unforeseen circumstances or labor shortages.

Plus, cross-training employees gives them more skills and reduces the reliance on some employees who need to work overtime because of their expertise.

However, from a practical point of view cross-training may not be that easy and may introduce its complications. The right software records working hours accurately and pays rates to anyone according to their job.

#8: Automated Scheduling

Today, there is no need to manually hire scheduling staff. There are many simple and affordable timesheet and scheduling software automation tools.

conclusion

Scheduling and workforce management tools, such as EasyRoster, make it easy to track employee overtime and hours. When using these tools effectively, most companies will see an immediate cost reduction in administrative burden and payroll errors, labor expenses and overtime pay. At the end of the day, it is possible to deduct overtime pay. All it has to do is make smart strategies and adopt the right technology.

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