Overtime Cost Calculator
Overtime is priced twice wrong: at the bare wage times 1.5, ignoring that payroll taxes and comp ride on OT wages too — or as a vague 'expensive'. Enter the wage, burden and OT hours to see the true burdened OT rate, the annual premium beyond straight time, and what share of labor cost overtime has become.
Method and content reviewed October 1, 2026 · formulas checked against a test suite · runs entirely in your browser
Burdened OT rate = Wage × (1 + Burden) × Multiplier$25.00 × 1.31 × 1.5 = $49.13/hrTwo honest readings of the premium: if the extra hours are billed to customers at higher rates, the premium can be passed on — price rush work with it in mind. If they're not, persistent overtime is often cheaper to fix with a hire: run the Hire vs. Subcontract Calculator on the annual premium.
HVAC: where the number comes from
An HVAC company pays a technician $25/hour with 31% burden and runs 8 hours of overtime a week through a 12-week summer peak, at time-and-a-half. (Illustrative example — use your own payroll numbers.)
| Input | Value |
|---|---|
| Base wage | $25/hr |
| Labor burden | 31% |
| Overtime | 8 hrs/week × 12 weeks at 1.5× |
Result: $49.13/hr for OT — the 12-week peak costs $1,572 of premium beyond straight pay
The bare-wage version of this calculation ($25 × 1.5 = $37.50) misses the $11.63/hr that burden adds to every OT hour. For a 12-week seasonal peak, the premium is cheap compared with a hire; run all year, it's a different conversation.
Load this example into the calculatorThe calculation
| Burdened straight rate | $25 × 1.31 = $32.75/hr |
| Burdened OT rate | $32.75 × 1.5 = $49.13/hr |
| OT hours | 8 × 12 = 96 hrs |
| OT labor cost | 96 × $49.13 = $4,716.00 |
| Same hours at straight time | 96 × $32.75 = $3,144.00 |
| Premium beyond straight time | $4,716 − $3,144 = $1,572.00 |
How this calculator works
Every result comes from the formulas below — the math shown is the math used. Change any input and results update instantly in your browser; nothing is sent to a server.
- Burdened overtime rate:
OT Rate = Wage × (1 + Burden %) × OT MultiplierTaxes and workers' comp apply to overtime wages exactly as to straight ones — the multiplier applies to the burdened rate. - OT hours per year:
OT Hours = OT Hours per Week × Weeks - Annual premium beyond straight time:
Premium = OT Hours × Burdened Wage × (Multiplier − 1)What the multiplier alone costs, above the same hours paid at 1×. - OT share of total labor cost:
OT Share % = OT Labor Cost ÷ (Straight + OT Labor Cost) × 100If OT's share of cost exceeds its share of hours, the premium isn't being passed on.
What the result means
The burdened OT rate is the wage plus burden, multiplied — because taxes and comp ride on overtime pay exactly as on straight pay. The premium row isolates what the multiplier alone costs beyond the same hours at straight time: the number to weigh against hiring or against passing to the customer on rush work.
When to use it
Use it during seasonal peaks, before approving an overtime-heavy schedule, and whenever someone quotes '1.5 times the wage' as the cost of an extra hour.
Want the concept behind the math in depth? Read The True Cost of Overtime: Why an OT Hour Isn't 1.5× the Wage or How to Calculate Labor Burden (And Why $25/hr Isn't $25/hr).
Common mistakes
- Costing overtime at the bare wage times 1.5 — burden rides on OT pay too.
- Letting a seasonal premium become the normal schedule without re-running the hire comparison.
- Passing OT costs to customers on work that's only overtime because the estimate slipped.
Frequently asked questions
How much does an overtime hour really cost?
More than 1.5× the wage, because burden rides on OT pay: a $25 wage at 31% burden and time-and-a-half costs $31.88 × 1.5 = $47.81 per OT hour — not the $37.50 the bare wage suggests. The premium beyond straight time is what the multiplier alone adds, and it's the number to weigh against hiring.
Is overtime cheaper than hiring?
For short, temporary peaks — a busy season, one large job — almost always: OT scales down to zero when the work does, while a hire is a fixed annual commitment. For persistent overtime that's become the norm, add up the annual premium and run it through the Hire vs. Subcontract Calculator: paying premium rates year-round is usually the more expensive way to buy those hours.
Should I pass overtime costs to the customer?
On genuine rush work, yes — price it with the burdened OT rate inside, plus a premium for the disruption. On work that's only overtime because the estimate slipped, no: that's an estimating problem, and billing the customer for it costs more goodwill than the premium is worth. Persistent OT on normally-priced work means your rates don't cover the real cost of your hours.
Does overtime always cost more per hour, even for salaried or sub crews?
The statutory multiplier applies to hourly employees; salaried workers and most subcontractors don't carry it legally. But long hours still cost: fatigue-driven rework, slower productivity in hour 50 than hour 30, and burnout attrition are real costs even when no OT premium is invoiced. The calculator covers the legal cash premium; the fatigue tax you add from your own experience.
If the annual overtime premium keeps growing, compare it against carrying the hours on a payroll instead.
Compare hiring vs subcontracting →Related tools and guides
Overtime Cost Calculator is part of RateCraft, a set of free pricing and estimating tools for contractors and service businesses. Results are calculated entirely in your browser and are estimates for planning purposes — see our disclaimer and methodology.