See What Overtime Is Really Costing You
Enter your workforce details and overtime schedule to calculate total OT spend. Compare against the cost of hiring to decide when it makes sense to bring on additional headcount.
Workforce
Overtime Parameters
Annual Overtime Cost
$93,750
10 employees x5 hrs/wk x50 weeks
OT Hourly Rate
$37.50
Weekly OT Cost
$1,875
Monthly OT Cost
$7,813
Overtime vs. Hiring Analysis
Cost to Hire One FTE
$65,000
annual fully-loaded
Break-Even Point
34.7 hrs/wk
OT beyond this costs more than hiring
Your annual overtime cost exceeds the cost of hiring an additional employee. Consider bringing on a new hire to reduce OT spending.
How Overtime Cost Is Calculated
Overtime pay is calculated by multiplying the base hourly rate by the overtime multiplier (typically 1.5x for time-and-a-half). The total cost scales with the number of employees working overtime and the hours each person logs beyond their standard shift.
Weekly OT Cost = Employees x OT Hours x (Base Rate x Multiplier)
The premium rate paid for each overtime hour. At 1.5x on a $25 base, the OT rate is $37.50 per hour. Double-time (2.0x) pushes this to $50.
The number of weekly overtime hours at which hiring a new full-time employee becomes cheaper than continuing to pay overtime. This factors in the new hire's benefits and burden rate.
Overtime vs. Hiring
Overtime provides flexibility but costs more per hour than straight time. A new hire costs less per hour but adds fixed overhead. The right decision depends on how much OT you are running and how long you expect the workload to last.
When Overtime Makes Sense
- 1.Demand spike is temporary (weeks, not months)
- 2.Total OT hours stay below the break-even point
- 3.Recruiting and training a new hire would take too long
- 4.Seasonal work makes a permanent hire impractical
When Hiring Makes Sense
- 1.OT costs consistently exceed the cost of a new FTE
- 2.Sustained OT is driving quality issues and turnover
- 3.Demand growth is expected to continue long-term
- 4.Safety incidents are increasing on extended shifts
Managing Overtime Strategically
Overtime is not inherently bad. Used deliberately, it is a tool for managing variable demand. The problem is when it becomes the default operating mode rather than a conscious decision.
Monitor OT hours and cost each week. If you are consistently above your break-even threshold, it is time to start a hiring conversation.
Concentrating overtime on a few employees leads to burnout and higher error rates. Spread it across the team and rotate who works the extra hours.
Establish a maximum number of OT hours per employee per week. Beyond a certain point, fatigue degrades productivity enough that you are paying more per unit of actual output.