As US manufacturing firms have expanded operations and increased their headcount over the past year, it is not surprising that use of overtime hours has also grown, as firms scramble to keep their operations running smoothly around the clock, handle spikes in demand, or fill in for absences or vacancies in their workforce. The uptick has shown recent acceleration, with average weekly overtime growing from 4.3 hours in 1H17 to 4.5 hours in 2H17, followed by expansion to 4.6 hours in January and 4.7 hours in February, according to seasonally adjusted data from the US Bureau of Labor Statistics.

Rising overtime use presents an opportunity for staffing firms to partner with their manufacturing clients to help them with their mounting overtime expense (where each overtime hour costs “time and a half.”) For example, a client averaging 4.7 hours of overtime is paying an overtime premium on 10.5% of hours worked (4.7 overtime hours / 44.7 total hours) and paying an overtime premium amount equal to 5.3% of their payroll. Staffing firms are well positioned to provide assistance, in at least two ways:

Staffing firms can supply temporary workers (or help the client hire permanent workers) that can replace some of the overtime hours being worked by a client’s regular employees. For each hour where this substitution occurs, the 50% overtime wage premium is eliminated.
Staffing firms that offer consultative or workforce planning services, either on a paid basis or as a complimentary value-added service, can provide scheduling and/or predictive analytics that enable their clients to better manage both their nontemporary and temporary workers to reduce their overtime expense.

Overtime in Manufacturing

March 2018 chart

Average weekly overtime hours of production and nonsupervisory employees (seasonally-adjusted)

Overtime is used in some manufacturing industries more than others, as shown in the accompanying graph that displays the average weekly overtime hours of 18 manufacturing industries tracked by BLS. The industries with the greatest use of overtime are petroleum and coal products (8.2 average weekly overtime hours in 2H17), nonmetallic mineral products (5.8) and primary metal manufacturing (5.7). Those with the least overtime use are textile product mills (2.4) and apparel manufacturing (2.5). Despite the variation in usage levels, we note that average overtime use increased for 16 out of the 18 manufacturing industries when comparing seasonally adjusted averages for 2H17 with 1H17, signifying that overtime expense is a growing pain point broadly impacting the sector.

If not already part of their regular meeting agenda with clients and prospects, staffing firms may wish to engage their manufacturing clients in a detailed discussion about overtime use. With the passage of the federal tax cut bill, along with a favorable US and global economy, further expansion in the manufacturing sector is likely and the accompanying challenge of rising overtime is likely to remain a prominent challenge.