What Costs More – Paying Overtime or Hiring Temporary Employees?

Guam employers are subject to following the provisions of the Federal Labor Standards Act, which requires most hourly employees to be paid a 1.5 times higher rate for overtime, or any hours above 40 in a week. If employee overtime becomes excessive, it can cause a significant hit in the company’s budget. When unexpected or short-term work demand arises and simply cannot be completed within normal working hours, a cost-effective alternative is hiring temporary employees. Learn about the costs associated with overtime versus temporary employees:

Hourly Wage

Temporary employees may make a slightly higher starting wage than full-time permanent employees; therefore, the cost difference between current and temporary workers will depend mainly on the starting wage of regular employees. For instance, minimum wage workers plus the 1.5 times increase for overtime may not be much different than a temp’s hourly wage. However, the higher paid the hourly workers, the more significant the overtime costs will become over temporary worker wages.

Taxes

Employee taxes are paid on workers by the employer in regards to a percentage of how much the worker brings in that pay period. Once overtime is factored in, it could increase tax costs significantly for the employer. Hiring temporary workers may alleviate this issue, as the employment agency would likely handle the taxes.

Administrative Costs

Paying overtime for your workers may result in additional time spent on payroll, time record keeping, and other related administrative tasks. Since employment agencies tackle the administrative tasks associated with paying the temporary employees they provide, it saves in-house resources.

Productivity

Even if paying overtime is in the budget, it still may not be a good overall financial decision. After working additional hours over a full day, employee productivity is likely to suffer due to fatigue. While overtime may be plausible for overcoming a short-term project or crisis, if it continues for multiple weeks, performance may suffer to the point of being less productive than a 40-hour week. Hiring temporary employees can help maintain productivity without negatively affecting your current team.

Retention

Employee burnout from being overworked can ultimately lead to them quitting. High turnover can cost your company big time – hiring expenses can be pricy, and the lag time before you find replacements can leave you understaffed and affect workflow. Bringing on temporary employees in busy times can prevent your current team from being overworked and stressed, and improve retention.

 

Temporary employees can be an ideal solution to keep up with the ebbs and flows of your company’s workload. Find the best temps on Guam by teaming up with GuamTemps. Since 1988, we have worked with hundreds of Guam employers to provide the most qualified and motivated candidates for their short-term business needs. Contact GuamTemps today to learn more about our staffing services.

 

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