Understanding the Impact of Overtime on Construction Project Budgets

The global construction industry is worth $8.9 trillion dollars, a sum that is constantly increasing year over year. This makes it a highly lucrative business for everyone involved, from companies to clients and employees.

To make things even better, the wages in this industry have significantly risen in the last decade or so. Most young people are unwilling to work arduous construction jobs, leading to a deficit in the labor force and a subsequent increase in wages. Unfortunately, this increase also causes companies to have all sorts of headaches.

Specifically, modern construction businesses are forced to pay enormous paychecks to their workers. On top of that, unexpected overtime costs can be disastrous for the bottom line. This is why construction managers pay special attention to their rates and bonuses, something that can make or break their business.

The Issue with Construction Overtime

Historically speaking, tracking employees’ participation was one of the biggest issues for construction companies. For the longest time, businesses used analog systems, writing down daily work hours for each person. Unfortunately, this system was highly flawed, leading to numerous exploits and errors.

Operations got significantly better with the introduction of construction time tracking software. With these programs, businesses are able to track the workforce in the field and accurately assess their performance. Your employees can no longer “steal hours,” as you’d be notified each time they leave the site.

However, this doesn’t fully address overtime. Given that lots of unpredictable things can happen during a project, companies are often forced to backtrack work, leading to massive added expenses. Overtime spending is especially dangerous, as it can completely ruin your initial budget predictions and force you to lose money.

5 Tricks for Managing Construction Overtime

Although we can’t fully eliminate the risks associated with a construction project, we can at least minimize their impact. Here are a few practices that will help you better manage your expenses during your operations:

1. Identify the Issue

The last thing you want to do is have excessive overtime expenses. Paying for extra work is always more expensive, especially during holidays and weekends. This is why you need to do everything in your power to detect and eliminate the causes of overtime.

In other words, you need to master planning so that everything’s on schedule. Avoid heavy project loads and unrealistic deadlines, given that even small disruptions can lead to delays and, thus, over time. Think about potential staffing shortages and what to do if one of your employees’ becomes unavailable.

Perform a comprehensive audit of your logs to understand how to best employ your current workforce. If necessary, it is even better to hire additional workers than to pay overtime to your existing squad. Lastly, be realistic regarding your ability to handle the project as a company.

2. Get Acquainted with the Laws

Before starting a project, it’s vital that you get acquainted with the local overtime laws. Companies operating in their home country generally know the legislation by heart, but the problem occurs when they’re awarded a project abroad.

For example, the US law demands that companies pay 150% of their regular hourly rate. This leads to a massive increase in your standard payroll expenses, making extra work unfeasible over a long period. However, that doesn’t mean you can’t give a person extra hours as long as you make a deal in advance.

3. Utilize Software

Perhaps the biggest issue with construction work is that it’s hard to quantify. Yes, you might’ve paid an employee to work 40 hours a week, but you don’t know how many productive hours you’re actually getting. This is amplified by the fact that some people are willing to do everything in their power to scam the system.

In the past, we’ve seen situations where workers would slack off at the construction site, leading to missed deadlines and massive losses for the companies. It was also common for people to come late or leave early and mask their absence by manipulating the paper tracking system.

Luckily, new software has put an end to this practice. Today, you know where each person is located in the field by installing specialized apps on their phones. If you’re willing to invest in wearables, you can also monitor their vital signs, which is especially valuable for recognizing extreme fatigue and distress.

4. Train Your Staff

In some situations, overtime isn’t management’s fault and doesn’t have anything to do with planning or deadliness. Instead, it is related to workers’ skills or, better yet, lack thereof.

Many tasks in the modern construction business are machine-reliant. Employees handle very advanced AI-powered equipment that often requires both technical and practical knowledge. As you introduce these modern machines to the site, your staff might struggle to get ahold of basics, leading to a loss of productive time.

The good news is that this issue can be patched with some additional training. Furthermore, it wouldn’t be a bad idea to cross-train your employees to execute various tasks so you can quickly reroute them to priority activities.

5. Hire Contractors

Even if you put your best foot forward, there will still be situations where you’ll need extra help. Instead of paying overtime to your existing staff, you might consider hiring outside contractors who will bring in their own team.

The great thing about external teams is that they can quickly patch up holes you might have on the field. This makes them especially valuable in case of prolonged bottlenecks which you can’t solve with the existing staff. Furthermore, hiring contractors might also solve the problems caused by the internal team’s lack of training.

Conclusion

Managing construction overtime can be much easier than you thought. There are lots of great practices that you can introduce as soon as today, which will reduce your unexpected labor costs. With the previously mentioned tricks, you can improve staff management, streamline daily processes, and ultimately increase the profitability of your projects.

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