Overtime vs Hire Calculator

What this tool does

CM8-339 answers a question most organisations avoid until it has cost them a great deal of money: at what point does covering a gap with overtime cost more than employing somebody? For every gap it prices three options — overtime, a new employee and agency cover — on the same basis, and reports the break-even hours a week at which the answer changes.

Everything runs inside this single file: no account, no upload, no network request, which matters because the inputs are pay rates and the outputs are conversations about headcount.

The break-even hours a week

This is the number to take away. It converts an argument about principle into a single testable figure: above this many hours a week, hiring is cheaper.

It is usually lower than people expect, for three reasons that compound. Overtime carries a premium of a half or a whole extra hour's pay. It carries employer on-costs like any other pay. And it delivers less per hour than a normal hour does. Multiply those together and an overtime hour frequently costs twice what a normal hour costs, which means a gap of much less than a full-time post can justify a full-time post.

Why an overtime hour buys less

The tool applies a productivity factor to overtime hours, defaulting to 85%, and it applies it to the hours rather than to the money — because to get the work done you have to buy more overtime hours than the size of the gap.

That output falls with sustained long hours is one of the better-established findings in industrial research, and it is not a comment on anyone's commitment. It shows up as slower work, more rework, and more mistakes, at the end of a long day and in a fifth consecutive week of six-day working. Eighty-five per cent is a moderate assumption for occasional overtime; for a team that has been on it for a year, sixty to seventy is closer to what gets measured.

If you have your own figure, use it. If the idea is contentious in your organisation, set it to 100 and note that the break-even hours it produces are the most favourable case for overtime that can honestly be constructed.

The asymmetry nobody accounts for

An employee is paid for fifty-two weeks and available for about forty-six. Overtime is paid only when it is worked. The tool handles this deliberately: the derived salary uses fifty-two weeks, while overtime is costed over the weeks the gap actually runs.

This is what makes overtime genuinely the right answer for short and irregular demand, and it is worth stating plainly, because a tool that always said "hire" would be no more useful than the instinct that always says "overtime". A six-week spike covered by overtime costs a fraction of a permanent post, and the sample data includes exactly that case.

What hiring really costs in year one

Three costs beyond salary, and the second summary table shows them separately because they are what makes hiring look worse than expected at first and better than expected afterwards.

• Recruitment — advertising, agency fees, the time spent shortlisting and interviewing, checks. Fifteen to twenty-five per cent of salary where an agency is involved.
• Equipment and setup — tools, protective equipment, a licence, a vehicle.
• Ramp-up — the period during which they are paid in full and producing a fraction, and somebody experienced is teaching instead of working. The tool charges half the ramp-up period as lost output, plus a quarter of that again for the teaching. The period itself scales with the skill level: days counts as a quarter of the setting, weeks as one, months as three.

Because these are one-off, the tool reports year one and the steady state separately. A decision about a permanent gap should be made on the steady state, with year one treated as an investment — using year one for a permanent problem is how organisations talk themselves into a third year of overtime.

Where agency fits

Agency rates look expensive per hour and frequently are not, because the rate already contains their on-costs and there is no recruitment cost, no ramp-up borne by you, and no commitment beyond notice.

The variable that decides it is productivity. A long-term agency worker who knows your routes, your products and your systems can be as productive as your own staff. Somebody different every week cannot, and the honest figure there is well below eighty per cent. The sample data contrasts both.

The sustainability flag

The tool calculates overtime per person as a share of the contracted week and flags anything above the threshold in Settings, twenty per cent by default.

This matters because the cheapest option on the page can still be the wrong one. Sustained overtime above a moderate level raises absence, raises mistakes, and eventually removes the people who were carrying it — and a resignation in a skilled team costs far more than the overtime ever saved. When a row shows overtime as cheapest and unsustainable, the recommendation says so, because that is the most expensive outcome available: the cost is real, it is simply landing somewhere the payroll report cannot see.

Spikes, seasons and permanent gaps

The duration field is the most important answer on the form, and it should be the honest one rather than the hopeful one. Overtime is the right answer for a spike, defensible for a season, and rarely right for anything permanent.

The difficulty is that a permanent gap and a temporary one look identical for the first six months. Every organisation with an entrenched overtime problem arrived there by treating a permanent gap as a spike, month after month, with each individual month being a perfectly reasonable decision. If a gap has been described as temporary for more than two quarters, it is not temporary — and the sample's first row is that story.

The formulas

No discounting is applied, and the comparison is annual rather than over several years. For a permanent gap, compare the steady-state hire cost with the overtime cost and treat year one's extras as the cost of making the change.

FAQ

The break-even is lower than a full-time post. How? Because an overtime hour can cost close to twice a normal hour once the premium, the on-costs and the productivity loss are combined. Twenty hours a week of overtime frequently costs more than a thirty-seven-hour employee.

We cannot recruit — nobody applies. Then the practical choice is between overtime and agency, and the tool still prices those two. It is also the strongest possible argument for looking at the pay rate: if the salary cannot attract anybody, the overtime cost is evidence of what the work is actually worth to you.

Our people want the overtime. Frequently true, and it is a genuine argument for keeping some. It is not an argument for a structural gap: a team that depends on overtime for its normal income resists every improvement that would remove it, which is its own long-term problem.

Why does hiring show a surplus? Because a new employee brings a whole contracted week and the gap is smaller. By default that surplus is valued at nothing, which is conservative. Raise the setting only where a genuine backlog would absorb it.

Why not hire part-time? Often the right answer, and the tool models it through the same setting: put the surplus credit at 100% and the hire is charged pro-rata to the gap, which is arithmetically a part-time post. Two cautions before doing it — recruitment cost and ramp-up do not scale down with the hours, and part-time appointments are much harder to fill in some roles than the pro-rata salary suggests.

Agency comes out cheaper than overtime almost everywhere. Is that right? Arithmetically, usually yes, and it surprises people. Time and a half plus employer on-costs is around double the basic rate; an agency charge-out is typically a third to a half above it and already includes their on-costs. What the comparison cannot see is that agency cover has to be arranged, inducted and supervised, and that your own people already know the job. For a handful of hours a week that friction normally outweighs the difference — which is a reason to override the tool knowingly, not a reason to distrust it.

Should the recommendation override my judgement? No. It cannot see whether anyone is available to recruit, what the team would think, or what happens to the overtime bill in a downturn. It tells you what the money says, which is one input.

Saving your work

Gaps, settings and the report header are written to this browser's local storage as you type. Treat Export .json as the real save, which Import .json restores anywhere. Export CSV gives you the comparison for spreadsheet work. Reset asks twice, then erases everything. There is no undo.

The backup contains pay rates and staffing intentions. Keep it off shared drives.

Accuracy & disclaimer

The arithmetic is straightforward; two of its inputs are judgements. Overtime productivity falls with sustained long hours, and the default is a reasonable figure rather than a measured one for your business. Ramp-up time for a new starter is routinely underestimated.

The tool also cannot price what usually decides the question in practice: whether anyone is available to recruit, what sustained overtime does to error rates, absence and retention, and whether the organisation is in a position to hire at all. Nothing here is employment or legal advice, and working-time limits, agency regulations and collective agreements vary by jurisdiction and are not modelled.