Rush orders and overtime: the labour cost your price list never shows

The problem: an average hour hides the expensive order

Most price lists assume one labour cost per hour. Orders do not. A routine order runs through the normal shift. A rush order pulls in overtime, an agency worker or a reshuffled schedule, and the extra cost lands on that customer and that product, not on the price list.

The pressure is building from several sides. From 1 April 2026 the National Living Wage for workers aged 21 and over is £12.71 an hour, and £10.85 for ages 18 to 20, according to GOV.UK. Labour is also a smaller part of a bigger squeeze, as the next section shows.

Why it matters now

The ONS producer price release of 21 October 2026 shows input prices for materials and fuels up 8.3% in the year to September, and factory-gate output prices up 4.6% (ONS). Costs are rising faster than prices, so margin is being squeezed before labour is even counted.

Labour premiums are a recognised cost in their own right. Make UK's August 2026 report, Shift Patterns, Pay Premia and Benefits 2026, covers overtime and bank holiday payments as a distinct topic. We have not used its figures, because the full data sits behind a paywall.

Here is why the average misleads. The numbers below are illustrative figures. Take a base rate of £15.00 an hour and overtime at time and a half, which is £22.50. A rush order needing 6 extra hours costs £135.00. If that order is worth £1,800 at a 30% gross margin, the margin is £540. After the overtime it is £405, or 22.5% of order value. Ten such orders turn £5,400 of expected margin into £4,050, yet the price list still shows 30%.

The solution: measure labour by order

The principle is simple: cost the order, not the average hour. Harvard Business School's Working Knowledge describes time-driven activity-based costing as needing only two estimates: the cost of each unit of time your resources supply, and the time each order or customer requires. Multiply them and you can assign cost to individual orders and customers.

You do not need a new system to start. A spreadsheet with one row per rush order is enough: customer, product, extra hours, overtime or agency rate, and order value.

Why the method holds

The same source notes that once costs are assigned this way, managers can also see the cost of unused capacity. That separates two different problems. Some customers genuinely cost more to serve, and some of the cost is idle capacity you carry regardless. Each needs a different response, so the split matters before you change a price.

Tips and tricks for this week

1. Take your 10 most recent rush orders and count the extra hours on each.
2. Record overtime and agency hours separately from standard hours.
3. Test a rush surcharge or a minimum order size. In the example above, a 5% surcharge adds £90 to a £1,800 order and recovers two-thirds of the £135.00 overtime.
4. List the three customers who cause the most urgent orders, and ask why.
5. Choose one change, for example a surcharge on rush orders, and apply it from Monday.

If you want a wider view of where margin leaks, the Business Health Check is a place to start.