Overtime Expenses

Overtime refers to the work performed by employees outside the basic working day (usually 8 hours a day, 5 days a week) or in accordance with company rules, work contracts, laws, or union (collective) agreements. Overtime means additional costs for employers, and many companies fail to fully understand these additional costs. According to industry and labor agreements, the cost may include wage increases (for example, overtime penalty rates 1.5 times for hours worked above 40 hours and 2 times over 60 hours), retirement expenses, and employment tax. These are hard costs that can be measured on the balance sheet. However, there are also soft costs. Studies have shown that the longer employees work, the lower their productivity. Therefore, research shows although most companies will consider the additional “hard” wage costs associated with overtime, that few companies consider additional soft costs, so their impact on the business is not obvious.