Free HR calculator
Overtime vs New Hire Calculator
Compare what recurring overtime costs over a year with the cost of hiring another employee. See how many weekly overtime hours make hiring the less expensive option.
About this calculator
Related note: The FLSA exempt salary threshold Note reviewed
What to expect Have your weekly coverage hours and both hourly pay rates ready. About one minute.
Your staffing needs
Cost assumptions
Weekly overtime break-even
What the numbers suggest
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How the calculation works
Comparing overtime with hiring
Your overtime cost depends on the hours needed and the rate paid. Hiring adds annual wages, benefits, and initial recruiting and onboarding costs. The break-even point is the number of weekly overtime hours where both options have the same annual cost.
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Finding the break-even
Divide the new hire's annual cost, including benefits, by the overtime hourly cost multiplied by the number of weeks overtime is needed. The base-cost break-even leaves out one-time hiring costs and the optional additional overtime adjustment. At the starting figures, overtime at 1.5 times a $28 hourly rate costs $42 per hour. Adding 7.65% employer payroll taxes brings that to about $45.21. A new hire earning $26 per hour for 2,080 hours, with a 30% benefits load, costs about $70,304 annually. The break-even is about 29.9 overtime hours per week.
Payroll taxes on overtime
The calculator applies the benefits load to the new hire and employer payroll taxes to overtime pay. The 7.65% default includes 6.2% Social Security and 1.45% Medicare, as IRS Publication 15 and the Social Security Administration state them for 2026. For 2026, Social Security applies up to the $184,500 wage base. Medicare generally continues at 1.45% above that amount. Adjust your assumptions for applicable employer costs, including state unemployment and workers' compensation.
Other costs worth considering
Regular overtime can increase fatigue, errors, and turnover. A new hire can spread the workload and add capacity. These factors matter most when the cost difference is small.
When overtime makes sense
Overtime can be a good fit for short-term, seasonal, or unpredictable demand. It provides flexibility while keeping permanent staffing aligned with ongoing work. As demand becomes more predictable, compare the costs again.
Test more staffing scenarios
Compare several staffing scenarios
The Overtime vs New Hire Planner workbook compares several staffing scenarios, shows which option costs less in each, and projects costs over three years. It also provides a summary recommendation.
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