Should I do a side hustle or work overtime?

Side Hustle vs Overtime: Which Extra Hours Pay More?

You’ve decided to work more hours. The question is: should those hours go to your employer (overtime) or to yourself (side hustle)? Here’s how to calculate which path puts more money in your pocket.

The Basic Math

Overtime calculation:

Overtime hourly rate = Regular rate × Overtime multiplier
Monthly extra income = Overtime rate × Extra hours × 4.33 weeks

Example: $35/hr regular, 1.5x overtime, 10 hrs/week

• Overtime rate: $52.50/hr
• Monthly: $2,273

Side hustle calculation:

Gross hourly rate = Your rate
Net hourly rate = Gross - (self-employment tax ~15%) - (business expenses)
Monthly extra income = Net rate × Billable hours × 4.33 weeks

Example: $50/hr side hustle, 10 hrs/week

• After SE tax (~15%): $42.50/hr effective
• Monthly: $1,840 (if all hours are billable)

The Comparison Table

$35/hr employee, 10 extra hours/week:

*After income taxes at 25% marginal rate

In this scenario, overtime wins on pure hourly rate.

But wait—there’s more to consider.

Hidden Costs of Overtime

What overtime doesn’t account for:

1. Burnout factor - More of the same work
2. No skill diversification - You’re not learning new things
3. Employer dependency - All income from one source
4. No equity building - You’re building their business, not yours
5. Opportunity cost - Time not invested in growth

Overtime also has limits:

• Employer may not always offer it
• Caps on hours in some industries
• Performance may suffer at hour 50+

Hidden Costs of Side Hustles

What side hustle hourly rates don’t show:

1. Non-billable time:

   • Client acquisition: 2-5 hrs/week
   • Admin, invoicing, taxes: 1-3 hrs/week
   • Learning, skill development: 1-2 hrs/week
   • If only 60-70% of time is billable, effective rate drops

2. Self-employment tax: 15.3% on all profits

3. Business expenses:

   • Software, tools: $50-200/month
   • Marketing: $0-500/month
   • Insurance (if needed): $100-500/month

4. Startup phase: First 3-6 months may earn little while you build

The Real Comparison (Honest Numbers)

Year 1 Reality Check:

Side hustles have a J-curve: Lower returns initially, higher potential long-term.

When Overtime Wins

Choose overtime if:

• ☑️ You get 1.5x or 2x pay
• ☑️ You need predictable, immediate income
• ☑️ You enjoy your work and wouldn’t mind more
• ☑️ You don’t have side hustle skills/ideas
• ☑️ Short-term goal (saving for something specific)
• ☑️ Your employment contract restricts outside work

Best overtime scenarios:

• Hourly worker with consistent OT available
• Holiday/premium pay opportunities
• Project-based surges (temporary)

When Side Hustles Win

Choose side hustle if:

• ☑️ You’re salaried/exempt (no OT pay)
• ☑️ You want income diversification
• ☑️ You have marketable skills worth $50+/hr
• ☑️ You want to build something with equity
• ☑️ Long-term wealth building is the goal
• ☑️ You’d be energized by variety

Best side hustle scenarios:

• Salaried employees (no OT opportunity)
• Skilled professionals (consulting rate > job rate)
• Those seeking eventual business ownership
• People wanting multiple income streams

Side Hustle Income Potential by Type

Realistic hourly rates after expenses:

Key insight: If your side hustle rate exceeds overtime rate, side hustle wins even with overhead.

The Long-Term View

Overtime income (linear):

• Year 1: $27,300
• Year 5: $27,300
• Year 10: $27,300 (maybe with raises)
• Total 10 years: ~$300,000

Side hustle income (can compound):

• Year 1: $18,000 (building)
• Year 3: $45,000 (established)
• Year 5: $75,000 (scaled)
• Year 10: $150,000+ (or sold for lump sum)
• Total 10 years: ~$750,000+

The equity question: Overtime builds your employer’s business. Side hustles build YOUR asset (client list, brand, systems).

A side hustle generating $50k/year could sell for $100-200k.

Tax Optimization for Side Hustles

How to reduce the tax gap:

1. Home office deduction - Portion of rent/mortgage, utilities
2. Equipment depreciation - Computer, software, tools
3. Mileage deduction - $0.67/mile (2024) for business travel
4. Health insurance deduction - If self-employed
5. Retirement contributions - Solo 401(k) or SEP IRA
6. Business expenses - Legitimately deductible costs

With good tax planning: Side hustle effective tax rate can approach W-2 rates while building equity.

The Hybrid Approach

Why not both?

Transition strategy:

1. Months 1-6: Take overtime, side hustle on side
2. Months 7-12: Reduce OT, grow side hustle
3. Year 2+: Shift based on what’s working

Making the Decision

Quick decision framework:

1. What’s your overtime rate?

   • 2x+ pay → Overtime is hard to beat
   • 1.5x pay → Compare to realistic side hustle rate
   • 1x (salary) → Side hustle likely wins

2. What’s your realistic side hustle rate?

   • Below OT rate → Overtime wins (short-term)
   • Above OT rate → Side hustle wins
   • Way above OT rate → Side hustle, definitely

3. What’s your timeline?

   • Need money now → Overtime
   • Building for future → Side hustle

4. What energizes you?

   • More of same job → Overtime (if you like it)
   • Variety and ownership → Side hustle

The Bottom Line

Overtime is the safe, immediate choice. Predictable income, no setup required, integrates with existing work.

Side hustles are the growth choice. Lower short-term returns, higher long-term potential, builds equity.

The math often favors overtime initially (especially with 1.5x+ pay).

The math favors side hustles long-term (if you build something of value).

For most people with marketable skills, the optimal path is: Take overtime in year 1 while building a side hustle on limited hours. Once side hustle income exceeds overtime income, shift your time.

About This Calculator

Tax calculations based on 2024 self-employment rates and average marginal income tax brackets. Side hustle income varies significantly by skill, market, and effort. Overtime availability depends on employer and role. Individual results vary. Last updated January 2025.