But if you hired the receptionist at a salary of $500 per week, they wouldn’t meet the minimum salary requirements—and would be entitled to overtime pay for any hours over 40 in a workweek. Under the Fair Labor Standards Act (FLSA), any employee that’s categorized as an exempt employee is ineligible for overtime pay—even when they put in more than 40 hours of work in a week. While salaried employees are often expected to work a standard 40-hour work week, many find themselves working additional hours without overtime compensation. Employers should ensure that they keep accurate records of hours worked by non-exempt salaried employees to comply with labor regulations. The minimum salary for exempt employees in 2025 is expected to increase, which means more employees may qualify for overtime pay than in previous years.
Misclassifying exempt vs. non exempt status can lead to hefty fines and audits. She doesn’t manage anyone and spends most of her time executing assigned tasks. Let’s say Emma is Which Version Of Quickbooks Online Should You Use a salaried marketing coordinator earning $40,000 per year. If you fail any of these, you’re classified as non exempt.
- These consequences highlight the importance of strict adherence to federal overtime regulations.
- Overtime is paid at 1.5 times that rate for every hour over 40.
- If you’re a salaried, non-exempt employee, overtime pay is 1.5 times your regular rate of pay for each hour over 40 hours in a workweek.
- For salary employees who make commission, you may need to recalculate their hourly rate with commissions included each week to determine if they’ve met the requirements for exemption.
- Salaried workers are not automatically exempt.
- Rather, it is an employee’s job duties that determine if they are exempt from the overtime rules.
- Contact an overtime law attorney today and get the legal help you deserve.
How do labor laws define overtime for salaried workers?
This classification can often lead to confusion, as many assume that being salaried means no entitlement to overtime. As we approach 2025, several key updates will impact how these laws are applied, particularly concerning salary thresholds and employee classification. Book a demo to see how Sage HCM handles payroll, overtime, and other key HR challenges. Sage HCM has many common (and quite a few uncommon) payroll calculations already built in, including section 7i overtime and union rules specific to certain cities and locals. They must also perform one of the duties of an exempt executive, administrative, or professional employee (as defined in the FLSA) on a regular basis.
Salaried employees often wonder about their eligibility for overtime pay, which is governed by federal labor laws. Additionally, exempt employees may still be eligible for overtime in some states or for certain types of bonus or incentive pay, depending on state law and specific job duties. Some salaried employees are exempt, while others are nonexempt and must receive overtime pay.
Flag anyone in the six states whose salary falls between the old and new thresholds. The major difference is the salary thresholds, which we’ll look at below. This is a much more relaxed duties test. Rather, it is the duties of the role that matter. Job titles alone will not determine whether a role is exempt or non-exempt. To qualify as FLSA exempt, workers must pass three critical tests.
If you are entitled to and have earned overtime pay, it is a breach of the Act for the employer not to pay it out to you. Your employer does not have the right to withhold, average, or “bank” overtime pay without your written consent. So if you work eight hours a day Monday to Friday (40 hours total), but then also work on Saturday for five hours, you would be entitled to be paid those five hours at time and a half. For everyone else, overtime applies and is payable – even if you are on salary.
This time, you’ll use the Fluctuating Workweek method outlined in the FLSA, which sets overtime at .5 the regular rate of pay. From here, calculate the overtime rate based on the regular rate of pay ($14.65 per hour). For instance, employees may qualify for the computer duties exemption only if they meet certain requirements. Of course, you may choose to pay your employee overtime, but this is not required by law. According to the FLSA, overtime is any time worked in addition to 40 hours in a workweek.
Employees must be paid on a salary basis, receiving a fixed salary regardless of how many hours per week they work. However, certain employees can be classified as “exempt” from these overtime protections if they meet specific criteria. If employers didn’t bump salaries before the new year, they might have more employees who are overtime-eligible. Salaried employees often enjoy benefits such as a fixed income and potential for bonuses, but they may also face challenges like longer working hours and less job security.
Common legal issues
If you believe you are owed overtime pay, you should first find a law firm that represents workers in claims for unpaid overtime and discuss your specific situation with them to find out if you have a valid claim. This is done by dividing the employee’s weekly salary by the number of hours that the salary is meant to cover and then multiplying that amount by 1.5 (time and a half). An employer cannot claim the overtime exemption if it has an “actual practice” of making improper deductions from an employee’s salary. The regular rate is obtained for each week by dividing the salary by the number of hours worked in the week and cannot be less than the applicable minimum wage in any week.
For salary employees who make commission, you may need to recalculate their hourly rate with commissions included each week to determine if they’ve met the requirements for exemption. Recently, the DOL revised some key standards related to salaried employees and overtime pay. If that employee works 41 hours in a given workweek, you must pay them their initial $600 (40 hours x $15) + overtime pay. By law, employees that qualify for FLSA protection (more on that later), must be paid overtime at no less than 1.5x the regular rate of pay. While the federal Fair Labor Standards Act (FLSA) sets the baseline for overtime exemption, some states have stricter rules, with higher salary thresholds that impact whether you should be earning overtime pay. Yes, salaried employees can get overtime, but only if they meet certain criteria under federal overtime law.
If an employee does not meet these requirements, they are considered non-exempt and are eligible for overtime. For the salary test, federal law requires a fixed salary of at least $684 per week ($35,568 annually), though this amount is subject to change due to ongoing legal review. The total compensation is divided by the total hours worked to find the regular rate for that week. For example, a part-time student who normally works 20 hours a week might be asked to take on extra shifts. Outside sales exemptions apply to employees whose primary duty is making sales or obtaining contracts, typically working outside the employer’s primary location. Exempt positions under the FLSA are determined by job duties, salary level, and payment method.
Salaried employees on remote work or flexible schedules can still rack up overtime hours, especially when boundaries between work and home blur. Federal overtime law doesn’t give a pass for “just this once.” If a non exempt worker goes over their scheduled hours worked, overtime compensation applies. If they’re classified as non exempt, those overtime hours must be paid, regardless of the situation.
Are Salaried Employees Entitled to Overtime
The employee must be paid a fixed salary, not an accelerated depreciation for business tax savings hourly wage. Understanding how these exemptions work is critical to avoiding wage and hour violations, back pay claims, and steep legal penalties. Under the FLSA, for example, most claims for unpaid wages—including minimum wage and overtime violations—must be filed within two years of the violation.
- Another trend is the increasingly rigorous enforcement by the Department of Labor and state labor agencies.
- This deduction reduces the worker’s taxable income, so they pay less in taxes or could potentially qualify for a refund.
- Remote or not, if your non exempt employees are putting in additional compensation-worthy time, they’re eligible for overtime pay.
- Don’t assume your salary protects your employer from overtime obligations.
- Georgia and Wyoming are the only states that have a minimum wage below the federal level.
- Yes, No Tax on Overtime was bundled into the sweeping tax act that became law on July 4, 2025.
- Misclassified employees may be entitled to back pay for unpaid overtime.
Calculating Overtime Pay for Non-Exempt Salaried Workers
For example, let’s say a standard hourly employee is paid a regular rate of $15 per hour. The FLSA also regulates minimum wage, which is the minimum amount an employee must be paid on an hourly basis. The benefits of hourly pay usually involve overtime protections under the FLSA. Their pay fluctuates based on the number of hours they work in a given workweek.
Non-exempt employees must be paid one-and-a-half times their regular rate of pay for any hours worked beyond 40 in a workweek. Even salaried employees who meet these earnings requirements may be entitled to overtime pay if their job duties do not involve management, supervision and/or operational decisions regarding the running of the business. To qualify for the administrative, professional and executive exemptions in California, employees must meet certain salary and duties tests and must be paid at least twice the state minimum hourly wage based on a 40-hour week. Many states have established their own overtime regulations, which can differ from federal law, including higher minimum salary thresholds for exemption or more stringent job duties tests. When a salaried employee is determined to be non-exempt, they are entitled to overtime pay for all hours worked over 40 in a workweek. So, if you had a salaried employee that was entitled to overtime with a weekly salary of $700—and that $700 salary was meant to cover 40 hours each week—you would divide their $700 salary by 40 hours to get their regular rate of pay—$17.50.
Do Salaried Employees Get Overtime Pay?
If you’ve got employees in California, New York, or Washington, pay close attention. Federal overtime law sets the base, but some states go above and beyond with different overtime rules. In late 2024, there was a push to increase the minimum salary threshold, but federal courts put a stop to it. If you’ve got staff on the edge of that line (earning just over or under) it’s time to double-check their exemption status. And if you believe you’re owed unpaid overtime, don’t stay silent. Employers must ensure compliance with all federal and state overtime rules.
While the FLSA sets federal overtime regulations, states can establish stricter requirements. Employers must analyze job responsibilities against FLSA standards to determine exempt status accurately. The salary basis test ensures an employee’s pay is not reduced based on work quality or quantity, with limited exceptions for specific absences. This issue impacts labor costs, employee satisfaction, and compliance with employment laws. A role that qualifies for an exemption under the FLSA might not meet the more stringent requirements of a state’s law.
