How do you calculate total overtime cost?

Multiply overtime hours by the pay rate, apply the capture factor, then add the fixed adder. With 100 hours at $45, an 80% capture factor, and a $250 adder you get 100 x 45 x 0.80 + 250 = $3,850.

What is the capture factor for?

It scales the raw cost for the share of hours that actually incur the premium or the portion of the rate that is truly incremental. At 80% it means only 80% of the gross hours-times-rate figure lands as overtime cost.

What is the overtime cost per unit?

In the worked example it is $38.50 per hour, calculated as total cost of $3,850 divided by 100 overtime hours. This is your all-in marginal labor cost for each overtime hour.

Is overtime cheaper than hiring a second shift?

Sometimes. At $38.50 per hour all-in, overtime beats a second shift only until the volume is high enough that added headcount spreads fixed costs better. Run both scenarios and compare cost per unit of output.

Should I include the fixed adder?

Yes, whenever there is a per-event cost like callout pay, a shift premium, or a minimum-hours guarantee. In the example the $250 adder is real money that pure hourly math would miss.

What is a good overtime cost ratio?

Most plants aim to keep overtime under 5% of total labor cost. Rising overtime cost per hour or a growing fixed-adder share are early warnings that you should add capacity.

Safety & Workforce calculator

Overtime Cost Calculator

The Overtime Cost metric tells you the true dollar impact of running hours beyond the standard schedule. Plant managers and finance leads use it to decide whether pushing overtime is cheaper than a second shift, a temp crew, or a slipped ship date. Because premium pay compounds fast, a few hundred overtime hours a month can quietly wreck a labor budget. This calculator captures both the variable premium cost and any fixed adders like callout pay so you see the real number.

What this calculator does

Estimate overtime cost from overtime hours, premium rate, and fixed burden.
Use it when overtime cost in safety and workforce is being put through a safety and workforce weighted-cost review.
It multiplies overtime hours by pay rate and a capture factor to get variable cost, then adds a fixed adder for total overtime cost and cost per hour.

Formula used

Weighted cost = quantity × rate × capture factor + fixed adjustment

Inputs explained

Overtime hours worked:
Overtime pay rate per hour:
Overtime premium capture factor:
Fixed overtime adder (callout or shift premium):

How to use the result

Use it before authorizing overtime to compare it against alternatives, or after the fact to reconcile what a stretch of overtime actually cost.
It applies a single blended rate and capture factor, so mixed crews with different premiums or shift differentials need to be run in separate batches for accuracy.

Current U.S. benchmarks

Manufacturing hourly earnings average $30.27 (BLS, Jun 2026), up 4.4% from a year earlier. Median machinist pay is $28.24/hr (OEWS 2025), with state medians on each state page. Manufacturers have 529k open positions nationally (BLS JOLTS).

Common questions

How do you calculate total overtime cost? Multiply overtime hours by the pay rate, apply the capture factor, then add the fixed adder. With 100 hours at $45, an 80% capture factor, and a $250 adder you get 100 x 45 x 0.80 + 250 = $3,850.
What is the capture factor for? It scales the raw cost for the share of hours that actually incur the premium or the portion of the rate that is truly incremental. At 80% it means only 80% of the gross hours-times-rate figure lands as overtime cost.
What is the overtime cost per unit? In the worked example it is $38.50 per hour, calculated as total cost of $3,850 divided by 100 overtime hours. This is your all-in marginal labor cost for each overtime hour.
Is overtime cheaper than hiring a second shift? Sometimes. At $38.50 per hour all-in, overtime beats a second shift only until the volume is high enough that added headcount spreads fixed costs better. Run both scenarios and compare cost per unit of output.
Should I include the fixed adder? Yes, whenever there is a per-event cost like callout pay, a shift premium, or a minimum-hours guarantee. In the example the $250 adder is real money that pure hourly math would miss.

Last reviewed 2026-05-12.