MarginWorkshopHire vs. Overtime / Second Crew Break-Even
When a demand spike hits, is it cheaper to pay overtime or bring on a hire (or a whole second crew)? See the real crossover, not a gut call.
Sensitivity to expected duration
| Scenario | Overtime total | Hire total | Strategy |
|---|---|---|---|
| Duration -20% | $40,560 | $29,040 | Hire (or stand up a second crew) |
| Duration -10% | $45,630 | $32,420 | Hire (or stand up a second crew) |
| Base case | $50,700 | $35,800 | Hire (or stand up a second crew) |
| Duration +10% | $55,770 | $39,180 | Hire (or stand up a second crew) |
| Duration +20% | $60,840 | $42,560 | Hire (or stand up a second crew) |
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Methodology
Formula: total overtime cost = coverage gap hours × loaded rate × overtime multiplier × (1 + burden) × duration. Total hire cost = one-time hiring cost + (hires needed × hours per hire × hire rate × (1 + burden) × duration). The strategy is classified by the percentage gap between the two.
Assumption: "hire" can mean one new worker or an entire second crew, the math is the same either way, hours per hire just represents one hire-unit's weekly hours.
Limitation: doesn't account for training ramp-up time for a new hire, or the risk of a demand spike ending earlier or later than expected.
Guide: The Employee vs. Subcontractor Staffing Guide, why duration, not just cost, decides this one.
Frequently Asked
- What is the real crossover between overtime and hiring?
- Overtime premium pay scales directly with hours worked; a new hire or crew carries fixed onboarding and ramp-up cost but a lower marginal rate, so the cheaper option depends on how long the demand spike is expected to last.
- Why consider a second crew, not just one more hire?
- Some demand spikes need more than incremental headcount, a full second crew with its own equipment and supervision; this engine compares that option too, not just overtime versus a single hire.
- What if the spike turns out to be permanent, not temporary?
- Re-run the comparison assuming a full year of the higher demand level; a decision that favors overtime for a short spike often flips toward hiring or a new crew once the horizon extends.
- Does this include the cost of training a new hire or crew?
- Include ramp-up cost, reduced early productivity and training time, in the labor cost input; a raw wage-only comparison understates the real cost of standing up new capacity.