The Fair Labor Standards Act requires employers to pay non-exempt status to employees an overtime rate at least equal to 1.5 the normal hourly wage for each hour worked beyond a 40-hour workweek period.

Your organization strategy is to grow the organization and increase revenue.You have just received a contract that will increase production and output by 10 percent over the next five years.

As a staffing strategist, the CEO has asked you if it would be cost effective to have the current employees work overtime during the life of the contract or hire new employees?

Scenario 1 - OVERTIME -

Assuming your company employees, 1,000 manufacturing employees and each of these employees earn $20 per hour.Due to the increase in output each employee would have to work an additional 4 hours per week (40 hours per week X10%).For each additional 4 hours, employees would earn $30 per hour ($20. X 1.5 hourly overtime pay).

Scenario 2- NEW EMPLOYEES -

To meet the new demand (10%) output, your company would have to increase the workforce by 10 percent, or 100 employees (1,000 X 10%).In addition to the hourly cost of $20. per hour, there are costs associated with hiring new employees.These include benefits ($10,000 annually per new employee) recruitment cost ($5,000 a one-time basis per employee) training($3,000 on a one-time basis per employee), and termination $12,000 upon the end of the contract period.

After calculating and running the numbers, what would be the most cost-effective for the organization, paying overtime or hiring new workers?