With the implementation of the Employment Rights Act 2025 progressing, organisations face significant changes in how they respond to fluctuations in demand.
Zero-hours contracts have come under sustained scrutiny. The legislation seeks to introduce guaranteed minimum hours and more reasonable notice of shift changes, with implications for employers and agency workers alike. For organisations that rely on rapid scaling of hours, delivering flexibility may become more complex.
With this in mind should we revisit the simplest, yet least examined, forms of flexibility: overtime?
Overtime is relied upon worldwide by employers and employees alike. But has it become so embedded in working life that its wider impact goes unquestioned?
Even in the Review of Modern Working Practices led by Matthew Taylor, the term “overtime” appeared only a handful of times. The review acknowledged that “working longer hours increases the risk of occupational illness, such as stress and mental health problems”, and that duration of work is a key indicator of job quality.
Data from the Office for National Statistics shows average overtime levels have remained relatively stable in recent years, between 2.5% and 3%. In some industries and sectors, especially where work is seasonal, this average is much higher, reaching almost 8% for process plant operatives.
So given its prevalence, why is the legitimacy of overtime so often overlooked? Should we simply accept that there’s nothing wrong with it?
To address the first part of the question, people may see overtime as too positive a story without considering the downsides. The advantages are clear; overtime gives people more money. It is frequently used as a method of increasing the take-home pay of often low-paid employees on a basic minimum wage. For businesses, it offers a straightforward way to increase output without the need for additional training, employment costs, or other administrative burdens. So as other methods of flexibility become more regulated, could or should this, be relied upon further?
The Productivity and Health Cost of Overtime
Overtime is not without downside, productivity gains increase only up to a point. Beyond this, longer weekly hours do not translate into proportional output and may even reduce quality, as highlighted in Matthew Taylor’s review.
Moreover, overtime is rarely evenly distributed. Research indicates that approximately 20% of employees account for 60% of all overtime hours, concentrating risk on a small segment of the workforce.
The impact goes beyond productivity, extended working hours carry significant health and safety risks. Studies consistently link long hours with:
- Fatigue and reduced alertness
- Increased risk of cardiovascular problems
- Musculoskeletal injuries, particularly back pain
- Elevated blood pressure
- Mental health challenges, including stress and depression
- Adverse reproductive outcomes for women, such as lower birth weights
- Higher rates of alcohol use and, in extreme cases, suicide
These consequences affect both employees and organisations. Absenteeism rises, and when absences must be covered, additional overtime may be required, creating a self-perpetuating cycle of risk and cost.
The conclusion is clear: excessive working hours should be avoided wherever possible.
Understanding Your Demand Profile
To reduce reliance on excessive overtime, organisations must first understand their actual demand profile. Surprisingly few take the time to analyse it, often assuming they “know” it instinctively. In practice, detailed review frequently uncovers unexpected peaks and troughs, even in operations thought to run at a steady pace.
Demand may vary by hour, day, week or month and can be driven by predictable factors (seasonal trends, holidays or known busy periods) or by unpredictable events. For short-term or rare peaks, overtime may still be a practical fallback. However, it should not be the default solution without scrutinising the cost and workforce impact, especially when premium rates such as time-and-a-half or double-time are involved.
Overtime as the Default?
With foresight, is overtime truly the best response? Organisations often default to overtime because it is simple, but simplicity can hide cost and risk. A carefully planned approach starts with understanding exactly when work needs to be done, the skills required and which roles are critical.
Mapping critical tasks and defining “time-critical” staffing levels are essential. Only then can appropriate workforce structures be considered. In many cases, redesigning teams to better align available employee hours with operational demand produces more sustainable flexibility than relying on repeated overtime.
Matching Peaks and Troughs More Intelligently
The Hidden Cost of Traditional Staffing Models
In traditional working models, overtime is used to cover peaks. However, peaks are not the only source of waste. Periods of underutilisation often carry an even greater hidden cost.
The line drawn between “peak” and “trough” determines whether an organisation chooses to overstaff and struggle to flex down, or understaff and struggle to flex up. One approach guarantees service levels but carries spare capacity. The other relies heavily on voluntary overtime.
The Agency Workforce Alternative and Its Limits
In recent years, many organisations, particularly in manufacturing and distribution, reduced their core workforce to a lower baseline and relied on agency labour to absorb peaks. To employers it seemed a win-win, lower fixed cost and guaranteed attendance when required.
In practice, it often created engagement challenges, cultural division and reduced accountability. A “them and us” dynamic can undermine performance and retention.
With the evolving requirements of the Employment Rights Act 2025, this model may also become more complex, less dependable or more costly.
Designing Shifts Around Real Demand
A more sustainable approach is to design work patterns around verified demand data.
For example, consider a five-day, eight-hour shift pattern where Monday consistently requires overtime due to higher demand. Rather than repeatedly extending Monday through overtime, the shift structure itself could be redesigned: a ten-hour Monday balanced by shorter shifts later in the week.
In some cases, a modest adjustment to base hourly rates may offset lost overtime premiums, resulting in fewer hours worked, improved productivity and a more predictable cost base.
This principle is already visible in sectors such as accounting, where month-end periods carry longer hours, balanced across the rest of the cycle.
Managing Longer-Term Variation Through Banked Hours
Short-term peaks can often be addressed through smarter shift planning. Longer-term variation requires more structured solutions, such as banked or annualised hours arrangements.
These models distribute contracted hours unevenly across the year, aligning workforce availability with predictable fluctuations in demand. Holidays, pay and contracted hours can be aligned within the same annual framework, creating greater visibility and control.
A proportion of hours is typically left unallocated, allowing organisations to respond to short-notice requirements such as sickness absence. Unused hours may be written off at year-end, incentivising efficient deployment and lower absence levels.
Spreading Work More Evenly
Managing Hours Usage Transparently
Whichever flexibility model is chosen, visibility is critical.
Monitoring total hours worked, including standard hours, overtime and banked hours, allows organisations to distribute workload more evenly and reduce concentrated risk.
Workforce Management Systems ensure that planners are able to manage fairness and balance cost control by ranking employees against criteria such as cost (labour grade), accumulated hours, attendance patterns and bank levels. This ensures the right skills are deployed at the right time, without overburdening a small proportion of the workforce.
