Overtime Cost Calculator

How it works

Under the Fair Labor Standards Act, a non-exempt employee must be paid at least one and a half times their regular rate for every hour over 40 in a workweek (U.S. Department of Labor, Wage and Hour Division). Federal law does not require double time; some employers and states pay it, so the calculator lets you add double time after a weekly number of hours.

Costs that rise with wages, such as the employer's Social Security and Medicare, unemployment tax and workers' comp premiums, rise with overtime pay too. The wage-based burden adds them as a percent of wages. Benefits that cost the same however many hours are worked are left out, because overtime does not change them.

The alternative is a part-time hire who works the overtime hours at straight time. The hire has a fixed weekly cost that overtime does not (benefits, equipment, recruiting and training spread over the time employed), so overtime is cheaper for a few hours and the hire is cheaper beyond a break-even point: the fixed cost divided by the difference between the cost of an overtime hour and the cost of the hire's hour.

Formula

overtime hours      = max(0, hours − 40);  double-time hours = max(0, hours − double-time start)
weekly wages        = rate × (hours − OT hours) + rate × (1.5 × time-and-a-half hours + 2 × double-time hours)
weekly cost         = weekly wages × (1 + burden)
OT hourly cost      = 1.5 × rate × (1 + burden)
new-hire hourly     = hire rate × (1 + burden)
new-hire cost       = fixed weekly cost + OT hours × new-hire hourly
break-even OT hours = fixed weekly cost ÷ (OT hourly cost − new-hire hourly)
with double time after D, when that lands past D − 40:
break-even OT hours = (fixed + (2 − 1.5) × rate × (1 + burden) × (D − 40)) ÷ (double-time hourly cost − new-hire hourly)

Example

The Department of Labor's own example (29 CFR 778.110): at $12 an hour, 46 hours in a week pay $480 for the first 40 and 6 × $18 = $108 for the overtime, $588 in all.

At $20 an hour, a 50-hour week pays $800 straight time and 10 × $30 = $300 of overtime, $1,100 of wages. With the default 7.65% burden the week costs $1,184.15 and the overtime $322.95. A new hire at $20 with $150 a week of fixed costs would cost $150 + 10 × $21.53 = $365.30, so overtime is $42.35 cheaper. The hire becomes cheaper above $150 ÷ ($32.295 − $21.53) = 13.93 overtime hours, shown rounded up as 54 hours a week.

Assumptions and limitations

• Results are for informational and educational purposes and are not legal, tax or employment advice, and they are not a determination of what an employer owes under the FLSA or state law.
• The employee is assumed to be non-exempt and paid a single hourly rate that is their regular rate. Bonuses, shift differentials and other pay that raise the regular rate are not modelled; see the Overtime Pay calculator.
• Overtime is counted weekly, the federal rule. Daily overtime and daily double-time rules in some states are not modelled.
• The burden is applied evenly to every dollar of wages. In practice FUTA and SUTA stop at their wage bases and Social Security at its wage base, so the true burden on overtime later in the year can be lower.
• The new hire is assumed to work exactly the overtime hours, all at straight time, with the same wage-based burden. The fixed weekly cost default is illustrative.

Frequently asked questions