When 40 Hours is Enough

I recently read and article by Jessica Stillman in Inc. magazine entitled, Why Working More Than 40 Hours a Week is Useless. A link to the article was posted to Linked In. Let me just say up front that I agree with her general consensus on the 40 workweek which is based on multiple studies from the 1930s forward. I would like to add a few additional things to consider.

What are You Getting for Extra Pay?

Workplace rules in the U.S. generally require the payment rate to be time and a half the normal hourly rate for non-exempt employees. These employees are generally paid hourly, but they also are sometimes salaried employees.

In her article, Jessica Stillman refers to studies showing that increasing the 40 hour workweek to 60 hours (except for brief periods of time) does not result in a 50% increase in productivity. Rather, the increased productivity is more in the range of 25-30 percent. So, for each hour worked, you would only see at most 60% of normal output (Calculated as 30% additional productivity divided by 50% additional hours).

What is the Dollar Impact?

Let’s say you have an employee you pay $20 per hour. When they work overtime they are paid at time and a half which is $30 per hour. If they work 20 extra hours they earn an additional $600 in overtime pay. If their productivity is only 60%, then that means that they in essence are producing 12 hours of additional work (20 hours times 60%). So, their effective pay rate is $50 per hour ($600 in overtime pay divided by 12 hours). That is an effective rate that is two and a half times their standard hourly rate, not one and half times. This is something to think about if you regularly have non-exempt employees working overtime. In this particular case, you could hire another employee full time at $20 per hour or $800 per week. Yes, $800 is more than $600, but don’t forget that you will get much closer to 40 hours of work instead of 12. The bottom line is that as you see overtime increasingly become routine, you might want to consider hiring an additional employee. In fact, in this case you could hire a part-time employee for 30 hours per week at $20 per hour and pay the same $600 you would have paid in overtime. The real difference is that you will get 30 instead of 12 hours of work productivity. Of course, you have to factor in such things as the company’s share of payroll taxes and any other benefits associated with additional hiring, but the point is there is definitely a point of diminishing return for regular overtime.

What about Exempt Employees?

While the pay is not the issue with exempt employees (those that do not get overtime pay), there are other considerations. In fact, these are really the more important issues even for non-exempt employees. If you routinely have employees working an extra 10, 15, 20 or more hours per week, you will not only experience diminished returns for those extra hours, but eventually you will likely see a loss of effectiveness and efficiency for the first 40 hours per week. In addition, these employees may eventually resent the extra hours they work, experience burn out, and even lose enthusiasm for their job and the company. Turnover is highly likely to increase. Also, consider that when employees are working such long hours just to get their routine work done, they begin missing opportunities to improve overall operations.

Incidentally, I’m also speaking from personal experience, having been in positions where the 60 or 70 hour workweek was routine. It wasn’t until I had a boss who would say, “Go home” that I began to realize just how much effectiveness I was losing by working this way.

How are things at your company? Are you or your employees routinely working extra hours each week? If so, maybe it is time to pause and reflect. Some changes may be good for you, your employees, and your company.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.


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