Free HR calculator
Overtime vs New Hire Calculator
When extra work piles up, paying overtime is the quick fix, but at some point another hire is cheaper. This compares the yearly cost of covering the hours with overtime against the fully loaded cost of an added person. It finds the break-even point where hiring starts to win.
Before you start
What you will need. Extra hours needed per week, Current base hourly, New hire base hourly
Your situation
Cost assumptions
Hire once overtime passes
How the costs compare
The method
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.
How this is calculated
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. The pure cost gap near the break-even is often small, so those factors usually decide a close call. That 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.
Carry this into the decision
Compare every overload in one workbook
The in-depth Excel version weighs several overload situations at once, adds a three-year cost view, and gives you a board-ready recommendation with the break-even for each.
$39. 30 days. Reply to your receipt or email support@truestephr.com for a full refund. No form or explanation is required, and you keep the files.
Related
More free tools and the notes behind them
Put your own numbers in and read the result on screen.
Put your own numbers in and read the result on screen.
Put your own numbers in and read the result on screen.
Put your own numbers in and read the result on screen.
Put your own numbers in and read the result on screen.
Put your own numbers in and read the result on screen.
This tool estimates from the figures you enter. It is general information rather than legal, tax, or accounting advice, so check the result against your own records before you rely on it.