Overtime vs New Hire Calculator

How the overtime vs hire decision works

Overtime is a variable cost: you pay only for the extra hours, but at a premium, federally 1.5 times base pay for hours over 40 in a week. A new hire is a fixed cost: a full salary plus benefits whether the overload is 10 hours or 40, plus a one-time cost to recruit and bring them up to speed. Because one is variable and the other is fixed, there is a break-even point. Below it, overtime is cheaper. Above it, the hire is.

Finding the break-even

The break-even is the weekly overtime hours at which the yearly overtime bill equals the fully loaded yearly cost of the new hire. Divide the hire's loaded annual cost by the overtime hourly rate times the weeks you work, and you have it. If a new person costs about 70,000 dollars loaded and overtime runs 42 dollars an hour, the break-even sits near 32 hours a week. Run more overtime than that on a steady basis and the hire pays for itself.

The dollars are only part of it

Sustained overtime carries costs that do not show up on the wage line: fatigue, more errors, burnout, and the turnover that follows. A new hire, by contrast, adds capacity beyond the immediate gap and does not burn out your existing team. Because the pure cost gap near the break-even is often small, those factors usually decide a close call, which is why the soft-cost lever is there to test.

When overtime still makes sense

For short, seasonal, or unpredictable spikes, overtime is the right tool. You avoid the fixed cost and the risk of overhiring for work that will not last. The trap is letting temporary overtime quietly become permanent, where it erodes margins and people without anyone deciding to hire.

At how many overtime hours should I hire?

It depends on your pay rates and hiring cost, but the break-even commonly lands somewhere around 30 to 40 overtime hours a week for one role. This tool calculates the exact figure from your numbers. Past that, on a steady basis, hiring is usually cheaper.

How is overtime pay calculated?

Under federal law, non-exempt employees earn 1.5 times their regular rate for hours over 40 in a workweek. Some states and contracts are more generous, and some pay double time on holidays. Use your actual overtime rate.

What goes into the fully loaded cost of a hire?

Base pay plus benefits, payroll taxes, and overhead, which together usually add around 30 percent or more on top of wages, so salary is roughly 70 to 75 percent of the true cost. Add a one-time recruiting and ramp-up cost for the first year.

Why include soft costs for overtime?

Because steady overtime is not free beyond the premium. Fatigue raises error and injury rates, and burnout drives turnover, which is expensive to replace. Adding a soft-cost uplift makes those visible so a close call is not decided on wages alone.

Is this HR or payroll advice?

No. It is a planning estimate built on standard cost-comparison math. Calibrate the inputs to your business and confirm overtime and wage and hour rules for your situation.