In current business line particularly in a small business where two shift production processes are not possible due to financial reasons overtime is taking place, but before making any decision regarding overtime one should consider some key points.
Increase in cost: As in case of overtime the paying rate to employees shall be more than the normal rates, generally double of normal rates. Then it is sure that the production cost would be increased. In order to save this cost management may choose temporary labor, if available at the right time.
Silkasia Pvt. Ltd. (Garment company in India) has been saved about 0.5% of its gross profit by replacing the over time production plan with temporary labour.
The Mentality of workers: When workers know that company is using an over-time production then their mentality may turn to do more overtime to get a wage that is double than normal wage, due to this mentality their normal efficiency may get loose.
Difficulty to meet standards: Due to lost efficiency of the worker on normal time, the meeting of standard regarding labour consumption and related cost would be very difficult.
Non- achievement of this standard may prove as loss of company’s performance. For come out from this problem the company may use an efficiency checking mechanism system.
Difficulty to motivate the worker as well as managers: in case of overtime it would be very difficult to motivate the workers since they may lose the standard level and with an increased level of cost motivate the managers for their performance would be difficult.
The decision of overtime may show the inefficiency of company to meet commitments: At starting of a project each company commits for time required to completion of said project, this time duration normally don’t includes overtime strategy.
If after starting company use over time in normal situations then it may show a lack of efficiency of commitments and process of estimations.
All of these things must keep in mind whenever company is in process of decision of overtime. However overtime not bad for each situation, in abnormal situation and high demand this is good.
profit by replacing the over time production plan with temporary labour.