Unpaid overtime is likely to lead to low levels of productivity, and as we wrote on before, the Trade Union Congress wants to do something about it. After all, the UK has the highest incidence of unpaid overtime in all of Europe, with almost 20% of the total workforce putting in the extra hours without claiming the extra benefits and pay.
For a small business, one good idea to adopt is a flex-time policy, where employees are not given a fixed time for work, but are asked to put in the required eight hours per day—this means they can come in anytime they can (say, anytime before lunchtime) as long as they work the required number of hours. One good variation is the weekly flex-time, where staff are required to be at work 40 hours a week, and excesses in a day can be used to offset for under-times in another day within the week.
This is probably a good solution to those tardiness and absence problems.