Rising overtime costs: when outsourcing is cheaper

Key takeaways

Rising overtime costs mean a regular capacity gap is being covered at a premium rate by tired people. Occasional overtime is sensible; routine overtime for more than two months usually costs more than outsourcing the repeatable work behind it, and it raises error rates and staff turnover.

• 1.5x is a common overtime rate, so each hour costs half as much again.
• Overtime every week for 2 months or more is a capacity gap, not a peak.
• Managed offshore support typically costs £9–£18 per hour including cover.
• Outsource the repeatable work behind the overtime, not the whole role.

What do rising overtime costs tell you?

Rising overtime costs tell you that the team's contracted hours no longer cover the work, and you are buying the difference at a higher rate from the same people. It is a signal of a lasting capacity gap when it happens every week, and of a peak when it happens for a few weeks a year.

• When should a UK business consider outsourcing?

How much does overtime really cost?

Overtime costs the premium rate plus employer National Insurance and pension on top, and its hidden costs are often larger. UK employers do not have to pay a premium for overtime, but average pay across all hours must not fall below the National Minimum Wage. Many contracts pay time and a half.

At time and a half on a £14-an-hour role, each overtime hour costs about £21 plus on-costs, often £24 or more, well above an indicative managed offshore rate of £9–£18 per hour.

• Premium rate: often 1.25x to 2x base pay, set by contract.
• On-costs: employer National Insurance at 15% and pension on top.
• Hidden costs: fatigue errors, sickness and staff leaving.

• The true cost of an employee in the UK

When is overtime the right answer?

Overtime is right for short, predictable peaks such as a year end, a stock take or a two-week launch. It uses people who already know the work, costs nothing to set up and ends when the peak ends. It stops being right when it becomes routine, because the premium rate and fatigue compound month after month.

• Unpredictable workload? Why fixed staffing struggles

When is outsourcing cheaper than overtime?

Outsourcing is usually cheaper when the overtime is regular, the work behind it is repeatable, and there are at least 10 hours a week of it. A managed part-time seat covering those hours at an indicative £12 per hour costs roughly half the loaded overtime rate on many roles, and it comes with cover.

• The outsourcing break-even point: when it pays
• BPO cost per hour in the UK

What are the legal limits on overtime?

Workers in the UK cannot be made to work more than 48 hours a week on average, normally over 17 weeks, unless they opt out voluntarily and in writing. Regular overtime also needs to be managed as a health and safety risk, because long hours are a recognised cause of work-related stress.

• Small team burning out? Capacity is the fix

How do you reduce overtime without losing service?

Find the work that creates the overtime, move the repeatable part to extra capacity, and keep the in-house team on the judgement-heavy work during contracted hours. Reduce overtime gradually over four to six weeks while the new capacity settles, and track reply times so service does not dip.

• Log what overtime hours are spent on for two weeks.
• Separate repeatable from judgement-heavy work.
• Move the repeatable work to an outsourced seat.
• Taper overtime as the seat reaches target quality.

How do you compare overtime and outsourcing fairly?

Compare the loaded cost per hour of each option over three months, not the base rate. For overtime, add employer National Insurance and pension to the premium rate. For outsourcing, add any setup fee spread over the period and your internal owner's review time. Then compare the result per hour of work delivered.

Add one qualitative line for each: fatigue and error risk for overtime, handover and learning time for outsourcing. Those decide which way to lean when the numbers are close.

• Overtime: premium rate plus 15% employer National Insurance plus pension.
• Outsourcing: hourly rate plus setup fee spread over three months.
• Both: internal management time per week.
• Result: loaded cost per hour of work delivered.

• The hidden costs of outsourcing

What does this look like in practice?

A pattern we see in UK logistics and wholesale firms: the customer service team works 8 to 12 hours of overtime a week each, mostly answering delivery status queries after 5pm. Moving evening status queries to a managed team ends most of the overtime and gives customers replies in the evening, which they did not get before.

• See client work
• BPO Solutions for UK businesses

Overtime checklist

Use this to decide whether to replace overtime.

• Total overtime hours and cost for the last three months.
• Add employer National Insurance and pension.
• Log what the overtime is spent on.
• Check whether it is a peak or a weekly pattern.
• Cost an outsourced seat for the repeatable part.
• Taper overtime over four to six weeks.

Next step

Send us your overtime hours and what they are spent on. We will compare them with an outsourced seat and tell you honestly which costs less.