Unpaid overtime – how is it impacting your finances?

unpaid overtime

As an employee, company owner or future entrepreneur, unpaid overtime will play a very important part in your finances, human resources management and success. This article will explore what unpaid overtime means for Entrepreneurs and employees and how it measures your business success.

unpaid overtime

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Get the unpaid overtime tool it will help you understand the impact of unpaid overtime for YOU.

 

I’m some kind of an extremist about overtime and in particular unpaid overtime. I strongly believe it’s vital -and frequent- for startups, but I also believe that in a corporation lots of overtime can only mean one of two things:

  • the person is incompetent and should not be doing this. Find his/her talents!
  • The boss is incompetent and is giving too much work

Understanding the impact of the unpaid overtime on your company, your employees or yourself will make you aware of your impact, make you feel proud of your contribution and aware of what employees are giving you.

Unpaid overtime for the employee

By working for a startup, it is normal that sometimes you’ll have to work long hours, the processes are not ready (or even there) and any issue is a critical issue. In startup mode you “throw bodies at the problem”.  By doing unpaid overtime you are reducing your hourly value, so every hour brings you less money and on top of that you are not doing what is important for you. This is why you should have a compensation for this work, possibly a compensation that does require the company to spend cash, for examples shares, titles or vacation days.

Some math

If you have:
  •  $50’000 per year, for 52 weeks per year so 50000/52 per week
  • 40 hours per week (8 hours per day, 5 days a week)
  • every hour of your work is worth $24.04.
  • If you work 50 hours a week then your hour is now worth $19.23
  • If you work 60 hours a week then your hour is now worth $16.03

The difference between your standard earning (24.04) and your current rate is what you should ask the company to compensate.

Unpaid Overtime employee

Click on the image to do the calculation for your salary

Unpaid overtime for the startup entrepreneur

By owning a startup you are very well aware that cash is King and every activity bringing more cash is like fresh air for the business. So unpaid overtime is pure gold as it returns the company the maximum possible amount of cash from every worked hour. Those hours are 100% margin, you don’t pay your employee for those hours but you can bill them to customers. The amount of cash generated is even bigger if you are in the consulting business. You and the business should be grateful, this is the main reason you provide shares in a startup, to compensate the hard work at every level.

Some math

Every hour of unpaid overtime is an hour where you are not paying for salary, so represent a 100% margin on the person, so the more unpaid overtime the higher the overall margin you get. So for an employee with a salary of $50.000 for a 40h/week contract that the customer will pay $100 per hour we have a normal margin of 76% and better margin for each unpaid overtime hours.
Unpaid Overtime employer

Click on the image to do the calculation for your company

This is why most of the startups will provide shares in exchange for many hours of unpaid overtime. For the company it’s cash not going out of the company while the income of the work is counted and often billed, generating much needed cash flow.

Conclusion

Unpaid overtime offers a startup a way to reduce cash expenditure, generate more cash and increase margins. It’s very important that in exchange of these employees are offered interesting packages.

After using the unpaid overtime impact tool, did you got impressed by the impact it has on your life, both as an employee and/or as an entrepreneur?

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