Business Q & A

April 2006 » Business
"Marginal staff" and "Work hours and paid overtime"
David M. Wahby

Marginal staff

Dear Dave,

Our company has doubled in size during the past 24 months. Attracting clients is not an issue; the problem has been finding enough staff to meet the demands of the work that has been walking through the door.

In our zeal to fill openings, we have not always adequately screened new hires and have ended up somewhat compromising our historical standards. As a result, we find ourselves with some marginal people we should not have hired in the first place, but they are here now and doing the best they can. And while we know deep down that we should let them go, we are just so busy we don't see how we can cut them loose.

We want you to talk us into doing the right thing by going ahead anyway to clean house.

—F.H., Fla.

Dear F.H.,

Let's start with morale. Not dealing with sub-standard performance or out-of-bounds behaviors sends a terrible message and places a real burden on your best people. They know who is performing and who is not. If your high-quality staff sees you turning a blind eye, or continuously compromising your standards, you run the very real risk of losing their respect and confidence, and ultimately, your ability to lead. Sooner or later, the best and most capable employees will resent having to pick up the slack and will leave your firm for a better environment. Or worse, they will stay at your firm and quit making anything more than a marginal effort themselves.

What a waste that will be.

How about liability? Can you really afford to expose your firm to the increased risk of loss associated with having substandard people working on projects? How about the cost of alienating clients who become disenchanted with the work product or service experience of dealing with your sub-par staff? It's great that you have more work than you want at the moment, but what are you going to do when the inevitable next downturn hits and you have to overcome a soiled reputation at the same time you find yourself scratching for work? Finally, why waste this wonderful opportunity to upgrade and reshape your client base? If you have more work than you need, start saying no, raise your fees, or tighten your terms as a way to discourage marginal clients while you part ways with your questionable staff. Re-size your client base and the practice to what is appropriate and reasonable for the volume of work you can handle given the fully qualified people you can assemble and bring to bear.

There is no glory in getting big for the sake of being big.

Work hours and paid overtime

Dear Dave,

What do you think about the practice of paying the entire staff (hourly and salaried) for all the hours worked each week? Our employees routinely put in a minimum of 48 hours or more a week. We feel it is only fair to pay people directly for contributing this kind of time and effort. I understand paying for overtime is quite common among engineering firms, but I wonder if there are pitfalls we may not be aware of.

G.J., Ore.

Dear G.J.,

Yes, many firms share your point of view and pay overtime to both exempt (those not required by wage and hour laws to be paid overtime) and non-exempt (hourly workers entitled to time and a half for overtime) employees.

Otherwise exempt employees who receive overtime usually are paid at a rate equivalent to straight time for overtime hours.

However, recently I've come across a few firms that pay any and all staff who work in excess of 40 hours a week at the premium overtime rate of time and a half. Even some principals pay themselves directly for every hour worked, although it is still more common for principals and other senior staff to be paid on a fixed salary basis without direct compensation for overtime.

Firms figure it makes more sense to extend pay than to have to hire, train, and manage additional staff. They often can't find the staff to hire in the first place, and even if they do find them, more staff means more overhead in the form of office space, equipment, and benefit costs.

Some firms reason that a salaried, exempt employee's base salary includes some extra hours and covers as much as perhaps the first 45 to 50 hours in any given week. They only kick-in additional hourly pay when that base number of hours is exceeded. Other firms track exempt staff overtime and allow staff to take compensating time off during slower periods, or wait and pay out accumulated overtime as part of a quarterly or annual bonus program, subject in some cases to overall firm profitability.

Regardless of whether or not you pay overtime, it is important that you don't overwork your staff. There comes a point when working too many hours for too long has to take a toll on morale, mental fitness, efficiency, and quality of work. It is the nature of the business for any firm to have periods—weeks or even months—of end-to-end deadlines and crunches requiring extra effort, but those periods need to be the exception and not the rule. In the long-run there must be occasional slower periods mixed in to allow for adequate rest and recovery. If heavy, extended overtime describes your firm, monitor productivity and work quality very closely to make sure you're getting a true advantage (and not doing great harm) by working as hard as you do.

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