As others have pointed out, OT hours are incrementally less expensive than base pay hours, even if the employee is being paid 1.5 times their hourly rate for OT.
But my experience in manufacturing is that OT is almost an essential mechanism for handling the ups and down of a competitive company. If you don't want to be running a "hire and fire" operation, then you need a different approach for when sales decline, whether that is because the newer products are disappointing or whether it is because the overall economy is contracting.
If people are working an average of 10 hours OT on top of a 40 hour week, then contracting the business by twenty percent is as simple as reducing overtime to zero. (This is typically much more complicated by the fact that not all product lines contract by the same amount.)
Handling a sales contraction of twenty percent would otherwise have entailed laying off twenty percent of the workforce; a very unpleasant undertaking.
Excessive OT has been shown to negatively impact productivity and worker health so while OT may help a bottom line over the short term excessive reliance on it will only hurt a company in the long run.
That won’t stop them though.
Excessive OT has been shown to negatively impact productivity and worker health so while OT may help a bottom line over the short term excessive reliance on it will only hurt a company in the long run.
That won’t stop them though.