How to calculate overtime costs
A complete guide to calculating overtime costs under Australian Modern Awards. Includes overtime rate tables, calculation examples, and strategies to reduce your overtime spend.
Written by
Georgia Morgan
General information only – not legal advice
This guide provides general information about overtime calculations. Overtime rates vary by award and agreement. Always verify current rates for your specific circumstances. It does not constitute legal, HR, or professional advice and should not be relied on as a substitute for advice specific to your business, workforce, or circumstances.
What is overtime?
Overtime refers to hours worked beyond an employee's ordinary hours. For full-time employees covered by a Modern Award, this typically means hours beyond 38 per week or beyond a daily threshold (often 7.6 or 8 hours per day).
Overtime is different from penalty rates, which apply to work at certain times (weekends, public holidays, evenings). When both could apply, most awards specify only the higher rate is paid, not both.
Overtime calculation examples
See how overtime is calculated for different scenarios.
Weekday overtime (first 2 hours)
Base rate: $28.00 | Multiplier: 150%
$28.00 × 1.5 = $42.00/hour
$84.00 for 2 hours
Weekday overtime (after 2 hours)
Base rate: $28.00 | Multiplier: 200%
$28.00 × 2.0 = $56.00/hour
$168.00 for 3 hours
Sunday overtime
Base rate: $28.00 | Multiplier: 200%
$28.00 × 2.0 = $56.00/hour
$224.00 for 4 hours
Public holiday overtime
Base rate: $28.00 | Multiplier: 250%
$28.00 × 2.5 = $70.00/hour
$350.00 for 5 hours
Remember: Add superannuation (11.5% in 2024-25) to overtime costs. For $1,000 of overtime pay, super adds $115.
6 steps to overtime costs calculation
Follow these steps to accurately calculate and track overtime costs.
Identify when overtime applies
Determine which hours count as overtime under the applicable Modern Award or agreement.
Key points:
- Full-time: Usually hours over 38 per week or 7.6 per day
- Part-time: Hours exceeding agreed contracted hours
- Check if overtime applies after daily or weekly thresholds
- Some awards have different overtime triggers (e.g., 10 hours/day)
Find the ordinary hourly rate
Determine the employee's base rate before any overtime multipliers.
Key points:
- Use the award classification level rate
- For casuals, use base rate excluding casual loading
- Salaried employees: Annual salary ÷ 52 ÷ 38 = hourly rate
- Check RosterElf award guides for current rates
Apply the overtime multipliers
Calculate overtime pay using the correct multiplier for each overtime period.
Key points:
- First 2 hours: Usually 150% (time and a half)
- After 2 hours: Usually 200% (double time)
- Sunday overtime: Often 200% from the first hour
- Public holiday overtime: May be 250% or higher
Track overtime by category
Record overtime hours by type (weekday, weekend, public holiday) for accurate costing.
Key points:
- Separate weekday, Saturday, Sunday, and public holiday overtime
- Track by department or cost centre
- Note the reason for overtime (understaffing, peak demand, etc.)
- Use time tracking software for accurate records
Calculate total overtime cost
Add up all overtime payments to understand your total overtime spend.
Key points:
- Include all overtime types in your calculation
- Factor in superannuation on overtime payments
- Consider leave loading on annual leave accrued during overtime
- Compare overtime cost to hiring additional staff
Analyse and improve
Review overtime patterns to identify opportunities for cost reduction.
Key points:
- Identify peak overtime periods and causes
- Compare overtime cost vs casual/part-time hiring
- Review rostering efficiency to reduce unnecessary overtime
- Set overtime budgets and alerts
Control overtime costs
RosterElf provides real-time overtime alerts and labour cost forecasting to help you stay on budget. Built for Australian small businesses.
Overtime rates by award
Common overtime rates for popular Modern Awards. Click to view full award details.
| Award | First 2-3 hrs | After 2-3 hrs | Saturday OT | Sunday OT | Public Holiday |
|---|---|---|---|---|---|
| General Retail Industry | 150% | 200% | 150% | 200% | 250% |
| Hospitality Industry (General) | 150% | 200% | 150% | 175% | 250% |
| Fast Food Industry | 150% | 200% | 150% | 200% | 250% |
| SCHADS (Disability/Community) | 150% | 200% | 150% | 200% | 250% |
| Clerks (Private Sector) | 150% | 200% | 150% | 200% | 250% |
Rates shown are typical multipliers. Check your specific award for exact overtime provisions. View all award guides.
Strategies to reduce overtime costs
Practical approaches to minimise overtime spend while maintaining service levels.
Improve roster scheduling
Review rosters to ensure workload is evenly distributed and peaks are anticipated.
Can reduce overtime by 15-25% through better planning
Hire casual or part-time staff
Compare the cost of overtime vs hiring additional staff for peak periods.
Casuals may cost less than overtime rates for regular peak demand
Cross-train employees
Train staff across multiple roles to provide flexibility during absences.
Reduces reliance on overtime when specific roles are short-staffed
Set overtime alerts
Use software to alert managers when staff approach overtime thresholds.
Prevents unplanned overtime and enables proactive adjustment
Offer TOIL where permitted
Time off in lieu can reduce cash outflow while compensating employees.
Must be agreed in writing and comply with award conditions
Review workload and processes
Identify inefficiencies that lead to overtime and simplify operations.
Addresses root causes rather than symptoms of overtime
Common overtime mistakes
These errors can lead to underpayment claims or unnecessary costs.
Applying wrong overtime trigger
Consequence: Underpaying employees if overtime threshold is lower than assumed
Solution: Check the specific award for overtime triggers (daily vs weekly, hours threshold)
Not paying overtime on overtime
Consequence: Some awards require higher rates for overtime beyond certain hours
Solution: Apply 150% for first 2 hours, then 200% for subsequent hours (check award)
Ignoring super on overtime
Consequence: Superannuation is generally payable on overtime pay (OTE definition)
Solution: Calculate and pay super guarantee on most overtime payments
Averaging hours to avoid overtime
Consequence: Illegal unless permitted by specific averaging arrangement
Solution: Only average hours if formally agreed under award/agreement provisions
Confusing overtime with penalty rates
Consequence: Overtime is for excess hours; penalties are for unsociable times
Solution: Apply the higher rate when both apply (most awards don't stack them)
Related guides
More resources for payroll and compliance.
Frequently asked questions
- Overtime generally applies when an employee works beyond their ordinary hours. For full-time employees, this is typically hours over 38 per week or over a set number per day (often 7.6 or 8 hours). Part-time employees accrue overtime when they exceed their agreed contracted hours. Check your applicable award for specific triggers.
- Most Modern Awards specify 150% (time and a half) for the first 2-3 hours of overtime, then 200% (double time) for subsequent hours. However, rates vary by award and by when overtime is worked (weekdays, weekends, public holidays). Always check the specific award.
- Overtime applies to EXTRA hours worked beyond ordinary hours. Penalty rates apply to work at certain TIMES (evenings, weekends, public holidays) regardless of total hours. When both could apply, most awards specify that only the higher rate is paid, not both combined.
- Under the Fair Work Act, employers can require employees to work "reasonable overtime." Factors determining reasonableness include family responsibilities, health risks, notice given, usual patterns, and the employee's circumstances. Employees can refuse unreasonable overtime.
Regulatory sources
This guide is aligned with official Australian workplace regulations.
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