This tool is designed for managers juggling a growing workload. Instead of guessing whether overtime or hiring is cheaper, plug in real numbers and see the annual impact in seconds.
As business ebbs and flows, managers often ask employees to work overtime instead of immediately bringing on new staff. Overtime can be a flexible way to meet short-term spikes in demand. However, chronically paying time-and-a-half can strain budgets and morale. Our Overtime vs Hiring Cost Calculator helps you determine when it makes financial sense to add another full-time team member.
If employees earn an hourly wage of and receive an overtime premium of , the annual overtime cost for extra hours each week is:
Hiring a new employee carries both salary and benefits costs, represented as:
By comparing these values, you see the break-even point where overtime becomes more expensive than adding staff.
While dollars matter, consider worker well-being too. Excessive overtime can lead to fatigue, mistakes, and burnout. Employees may welcome the extra pay at first but grow resentful if long hours become the norm. Bringing in fresh talent can boost morale and provide new skills. On the other hand, hiring requires recruiting time and onboarding resources. It’s wise to look beyond the simple numbers before making your decision.
| Scenario | Overtime Cost | Hiring Cost |
|---|---|---|
| 10 OT hours/week | $39,000 | $55,000 |
| 25 OT hours/week | $97,500 | $55,000 |
In this example, ten hours of weekly overtime remains cheaper than hiring. At 25 hours, bringing on another worker saves money and eases the burden on existing staff. Use your real wages and benefits to see how the calculation plays out for your organization.
Retention is another hidden cost. Overworked employees may eventually seek jobs elsewhere, forcing you to spend time and money on replacements. Stable staffing levels foster institutional knowledge and reduce errors, which can save money even if wages are slightly higher.
Conversely, a new hire might bring fresh ideas that improve efficiency across the board. Weigh this potential productivity boost against the certainty of paying overtime every week to determine the smartest path forward.
If your workload fluctuates or you expect demand to drop soon, sticking with overtime might be best. Training a new hire only to lay them off can hurt team cohesion. However, if you anticipate steady growth, adding staff sooner can position your business for success. Analyze your sales pipeline and long-term projects alongside this calculator’s results.
This tool assumes overtime hours remain consistent throughout the year and doesn’t factor in hiring bonuses, payroll taxes, or recruiting costs. These expenses may tilt the equation slightly. Additionally, overtime laws differ by region—verify local regulations before relying solely on our math.
Overall, the Overtime vs Hiring Cost Calculator offers clarity when tough staffing decisions arise. Use it to balance productivity, employee health, and your company’s bottom line.
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