How would you calculate the economic value of overtime?

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New answer on Dec 22, 2022
3 Answers
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Lorenzo asked on May 29, 2018

Hi all,

how would you calculate the economic value of overtime?

I see two ways to obtain the gross value:

-Based on my actual economic package: (net monthly value/(1-tax rate %)) x 12 months

-Value based: supposing I will do on average 1.5hrs/day of overtime (maybe this value has to be higher in most strategy consulting firms?), that's 30hrs/month (no weekends included). What is the real value of this amount of time spent working instead of living my private life? (opportunity cost)

What would be your approach?


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Anonymous replied on Dec 22, 2022

The value of overtime to your employer will be based on your current economic package. the value to you will be the opportunity cost.

You tend to work up until the next hour of overtime is worth more to you (e.g. overtime) than it is to your employer (e.g. salary). This also explains why, empirically, overtime hours are paid more than normal hours.

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replied on Jun 02, 2018
Former BCG Principal and decision round interviewer

The second of the two methods you outlined gives indeed the economic value for the worker.

Together the two methods determine the “goal posts” of how overtime pay is determined for workers (sometimes legislation comes into play where overtime must be a minimum of 1.x times regular time pay). The final determination of the exact amount takes in to account the economic value that overtime creates for the employer. That is usually estimated by understanding the incremental profitability (vs. Profitability of regular hours) these marginal hours of work generate.

hope it helps,


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Anonymous replied on May 30, 2018

Hi Lorenzo,

I studied behavioral economics in college, so this is right up my alley. There isn't a right or wrong answer for this question- it entirely depends on how much you value an hour of time.

Here is another way to think about it- how much would you pay to get work an hour less each day?


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