Overtime is when your crew works more than the days minimum work hours. That's simple enough.
What gets complex is how to properly anticipate costs for the crew. I get hired a lot to review budgets which other people have done, to vet them for accuracy and give the Producers a second opinion on the production plan. About half the time, I see two common things which can cause much trouble when the project gets going. Let's talk about them...
INACCURATE PAYHOURS FOR THE DAY
In the Payhour Calculations section, I spoke about how 12 hours worked does not equal 12 hours of pay. That's part of the first major mistake I find. The other part is when people don't budget to allow for slightly longer hours for the crew who will need it.
If you plan to shoot a 12 hour day (14 payhours), then you are golden if everyone's call is actually the same time, and then you all finish shooting, wrap and are gone within 12 hours. Rarely happens. The Locations person and ADs are there and hour early to ensure the Catering is going and everything is up and running. Then the Camera people come in 15 minutes early because they need some time to prep their gear. Perhaps Wardrobe needs to come in early, as well as someone from Make-Up and/or Hair to start getting actors ready. On the end of the day, your camera, grips and electric most likely need 15 to 30 minutes to clean up their gear and pack it into the truck. So, what looked like a simple 12 hour day is now 12 hours and 45 minutes (12.7). If you only budget for a straight 12 hour day - then you will be about .5 to .7 off every day. Someone making $30 per hour, times 35 days for the shoot could be about $630 off, plus fringe. Then multiply that by the 35 crew (or more) that this affects. Suddenly, your budget is $26,000+ off. Yikes!
Best idea is to tack on an hour or 30 minutes for crew you feel may be called in early or need to work late most all the time.
LUMP SUM OVERTIME PERCENTAGE
This one I see the most, and it's simply one of the most inaccurate ways to account for the possibility of overtime (OT). Basically, the person puts in a line that states something like, "Overtime - Allow 10% of XXX", where XXX is equal to an approximate total of his regular pay. To illustrate this further, let's say the person makes $10 per hour and works 12 hours to make $140 (plus fringes). The line in the budget would then "allow" for 10% of $140, which is $14. So, great, there's $14 in the budget to cover any potential OT for that person, on that day.
At $10 per hour, and knowing that the OT would be his 13th hour of work, which is double-time pay, means he'd make $20 per hour. That's already $6 short of what the realistic OT would be. Do yourself (and the budget) a favor, and budget for that extra hour properly - don't use lump sum percentages.
Also, before you think, "OK, then I'll make my percentage allowance 14.29% which is $20 of $140." - then what happens when the person makes $12 per hour, or $30. then your percentage calculation would be customized to each person. That's a lot of work, but if you want to do it that way - best of luck to you.