Managing overtime with your HRMS

Overtime can strike fear in the hearts of any budget owner as it will quickly attack the bottom line. That concern has only intensified in recent years, as wage inflation, persistent skills shortages, and tighter labor compliance enforcement have made overtime management a board-level issue rather than a back-office one.

Are you keeping tabs on overtime costs? Read on for some common time and attendance overtime struggles and how your HRMS can help you to overcome those challenges.

Why overtime still escalates faster than expected

Organizations rarely plan to rely on overtime as a long-term solution. Yet once it becomes normalized, overtime often grows quietly, embedded in schedules, absorbed into budgets, and accepted as unavoidable.

Lack of information means that we cannot effectively plan for headcount.”

Having employees work overtime is like using contractors; sometimes it’s the best short-term fix, but it’s an expensive one for the longer term.

Are certain teams consistently mandating overtime? Or is there a difficult-to-fill position that necessitates overtime until someone is found? If you do not have access to data such as hours worked at hand, it’s not surprising that overtime costs are not controlled.

Many organizations still rely on manual or fragmented time tracking systems that make it difficult to identify patterns in overtime and workforce capacity. Comprehensive HRMS reporting consolidates time and attendance data so you can see where overtime is concentrated and why.

What overtime patterns reveal about staffing gaps

Reporting on and drilling down into overtime figures allows you to present some recommendations to management, such as when a new headcount is justified or when the open position’s salary needs to be increased to attract the right candidate.

More advanced HRMS platforms now support trend analysis across departments, locations, and roles, allowing leaders to distinguish between structural overtime (caused by understaffing or scheduling design) and episodic overtime (driven by seasonal demand, absenteeism, or unexpected spikes).

This distinction is massively important for managing overtime more effectively, because structural overtime rarely resolves itself and often signals deeper workforce planning issues.

Is overtime really unavoidable, or is it unevenly managed?

It’s just not possible to get enough good staff, overtime is part of the cost of doing business”

I once reviewed data in a major retail establishment with a large number of hourly staff. There was a discrepancy among teams; certain managers needed people regularly on overtime, while others only used it during the busy run up to holidays. This is precisely where the right HRMS can provide the guidance needed to tackle the problem.

Recent research suggests that how a company is managed plays a major role in how much overtime employees work. Even in similar industries, different management styles lead to different levels of overtime usage, indicating that overtime is often a result of internal business practices rather than just market demand.

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Scheduling decisions that quietly drive overtime costs

Some managers would just allow the computer to generate the schedules, while others would take the default schedule but modify it to make a better fit, knowing the staff. The more astute managers knew that certain profiles of employees would be dependable on an early Sunday shift and wouldn’t be calling out sick.

They could even predict with ease and not knowing the person, but by knowing a few key aspects about the employee such as length of service, whether or not the employee was a part-time student, etc.

The HRMS data can help with better decision-making, applying predictive analytics to attendance patterns, overtime thresholds, and availability preferences, reducing reliance on gut instinct alone.

This shift matters because occupational health research shows that long work hours and sustained overtime are associated with increased stress, burnout, and reduced performance, which in turn correlate with higher error rates, absenteeism, and turnover risk, meaning unmanaged overtime often contributes to the very staffing shortages it is meant to alleviate.

What effective overtime management looks like in practice

Overtime can have a heavy impact on the budget as well as staff productivity. Your HRMS is a valuable tool to help manage overtime as long as you make the investment in storing and maintaining the data.

To manage overtime more effectively, organizations are increasingly using HRMS insights to:

• Set early warning thresholds that alert managers before employees cross overtime limits
• Identify scheduling inefficiencies that inflate overtime costs
• Support compliance with evolving wage and hour regulations
• Model the cost trade-offs between overtime spend and incremental hiring