Overtime Is Taking Its Toll

December 22, 2004
American shift workers took on "excessively high" amounts of overtime in 2004, and that is taking a toll demonstrated in higher levels of turnover and absenteeism, as well as higher workers’ compensation costs. Productivity also suffers when shift workers take on high levels of overtime.

Those are some of the findings in a new report, "Shiftwork Practices 2005," by Circadian Technologies. The company, based in Lexington, Massachusetts, researches and advises companies with multiple shifts and 24/7 operations.

The study found that the average overtime rate in these so-called extended-hours businesses in 2004 was 16.2 percent--almost an extra day of work each week. The rate is a sizeable increase over the 12.6 percent rate in 2003.

That amount of overtime is "excessively high and will increase the stress and fatigue of employees," Circadian says. Senior research consultant Alex Kerin says the reasons for increased overtime are clear: The country is coming out of a recession and there’s plenty of work to be done. But there’s pressure on companies from Wall Street and other quarters to keep headcount down and productivity up. Overtime seems a ready answer.

But excessive overtime has a dark--and expensive--side that many companies don’t calculate, Kerin says. "There’s pressure to keep down headcount, but companies don’t consider the back-end losses and costs. If they started including them in the equation," they’d see it differently, Kerin says.

Among the findings of the report:

  • Absenteeism is up in extended-hours companies, from 5.8 percent in 2003 to 12.4 percent in 2004. The increase in absenteeism exacerbates the overtime problem--when people don’t show up for work, other employees are asked to do overtime to pick up the slack. Companies with very high amounts of overtime (8 hours of overtime per 40-hour workweek) had absenteeism rates of 17 percent, versus 9 percent in companies with low amounts of overtime.

  • Turnover in extended-hours operations was 9.8 percent in 2004, comparable to the 10 percent rate of 2003. But the rate for U.S. companies overall is 3.2 percent. In companies with very high rates of overtime, turnover was 11 percent, versus 8 percent in low-overtime companies.

  • Workers’ compensation claims were much higher for employees who worked very high amounts of overtime: $686 per employee versus $337 for an employee who worked little overtime.

  • Safety programs that addressed issues in shift work, such as scheduling, fatigue screening, sleep-disorder screening and information on coping with shift work, all decreased the cost of workers’ compensation claims. Drug and alcohol screening had very little effect.

  • Productivity suffers with high amounts of overtime: The average productivity rate for extended-hours companies is 81 percent. In companies with high overtime, the rate is 76 percent. "If you’re asking people to work 50 or 60 hours a week, you’re not getting the same rate of productivity as if they worked fewer hours, or you hired more people," Kerin says