Save Business Cash Flow With Smart Use Of Employee Overtime Hours

by Doug Smith, President, The Woodhaven Group

Consider this scenario.  Your company has had to operate through an extremely bad economy.  As owner or CEO, you were proactive  by reducing expenses to bring the breakeven of the company in line with reduced sales.  This reduction in expenses included eliminating employees.  Tough decisions to make but, looking back, it was obviously the right thing to do to maintain positive cash flow.

Does this sound familiar?  You are not alone.  A lot of good managers had to make the same type of decisions over the past 2 years.

Sales are now beginning to rebound and while progress is slow, it appears the worst days are behind the company.  Now the question becomes…… do you hire new employees to replace the ones you eliminated?

Here is what I have done after other economic downturns that required staff reductions.  Before hiring additional hourly workers or non-exempt employees do this instead.  Take the current employee group and give them overtime hours.  There are 6 benefits to doing this:

  1. It puts additional dollars in the paycheck of your key hourly or non-exempt employees.  They will appreciate the extra dollars coming their way.
  2. You will not have to spend valuable cash to recruit and interview replacements.
  3. There will be no new training cost since there will be no new hires at this time.
  4. There will be no added workmens compensation insurance nor employee benefit cost incurred without new employees.
  5. Most new hires make mistakes that costs the company cash during their ramp up period.  This potential expense is eliminated. 
  6. If the increased sales is not for real then you do not have to cut back employees again. 

Once you see the new sales increase is going to continue and overtime dollars grow, then it will be time to hire added staff. 

Until then you have saved cash, your company has survived, and there is a happy group of employees ready to grow the company into the future.

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