As with so many labor laws, this question does not have a single answer. Overtime hours must be paid out to some salaried employees, but not all. The answer to this question will depend on the exempt status of the employee.
Most states define overtime pay as compensation for extra hours worked above and beyond a typical 40 hour work week. Overtime pay is most commonly paid out to nonexempt hourly employees at a rate of one and one-half times the employee’s regular rate. Most salaried employees fall under an administrative exemption that prevents employers from having to compensate for hours of overtime.
What Is Exempt Status?
Exempt status for salaried employees refers to an employment classification that exempts them from certain provisions of the federal Fair Labor Standards Act (FLSA) brought forth by the U.S. Department of Labor. This classification is based on the nature of their work duties, salary level, and other criteria.
Salaried employees who are classified as exempt are not eligible for overtime pay, which is the additional pay that non-exempt employees receive for working more than 40 hours per week. They are also not subject to minimum wage requirements or certain other labor protections under the FLSA.
What Qualifies An Employee For Exempt Status?
To qualify for exempt status, employees must generally meet certain requirements related to their job duties and responsibilities, as well as their salary level. For example, they must perform certain executive, administrative, or professional duties and be paid a salary that meets certain minimum requirements.
It is important to note that exempt status is not determined by job title, but by the specific job duties and salary of the employee. Exempt salaried employees must receive a guaranteed salary that is in line with market rates for that role.
What Would Make A Salaried Employee Eligible For Overtime Pay?
In the United States, salaried employees are generally not eligible for overtime pay under the Fair Labor Standards Act (FLSA) if they are classified as “exempt” employees. However, if a salaried employee is classified as “non-exempt,” they may be eligible for overtime pay.
To be eligible for overtime pay, a salaried employee must be paid on an hourly basis, rather than a fixed salary, and must work more than 40 hours in a workweek. In addition, their job duties must not fall under any of the exemptions outlined in the FLSA, which include executive, administrative, professional, and outside sales duties.
How To Calculate Overtime Pay For A Non-Exempt Salaried Employee
Calculating overtime pay for a salaried employee who is eligible for overtime can be a bit more complicated than for an hourly employee. To calculate overtime pay for a salaried employee, you need to follow these steps:
- Determine the employee’s regular rate of pay: To do this, divide the employee’s weekly salary by the number of hours they typically work in a week. For example, if an employee earns a salary of $800 per week and works 40 hours per week, their regular rate of pay is $20 per hour.
- Calculate the employee’s overtime hours: Overtime hours are any hours worked beyond 40 in a workweek. For example, if the employee works 50 hours in a workweek, 10 of those hours are overtime hours.
- Determine the overtime pay rate: The overtime pay rate for a salaried employee is 1.5 times their regular rate of pay. In the example above, the employee’s regular rate of pay is $20 per hour, so their overtime pay rate is $30 per hour.
- Calculate the overtime pay: Multiply the employee’s overtime hours by their overtime pay rate. In the example above, the employee worked 10 overtime hours at a rate of $30 per hour, so their overtime pay for the week would be $300.
Keep This In Mind When Calculating Overtime Pay:
It is important to note that this is just one method of calculating overtime pay for salaried employees, and there may be variations depending on the specific circumstances of the employee and the employer.
Additionally, it’s essential to ensure that all employees are correctly classified as exempt or non-exempt and that they are paid in compliance with any state law or federal law regarding overtime pay requirements.
Can An Exempt Salaried Employee Fight For Overtime Pay?
It depends on the specific labor laws and company policies in your location. In some cases, salaried employees may be eligible for overtime compensation if they work more than a certain number of hours in a week, but this can vary depending on the industry, job role, and other factors.
If an exempt employee believes they are entitled to unpaid overtime wages for hours worked beyond the standard workweek, you should review their employment contract and consult with your company’s HR department or legal counsel to determine the validity of their claim.
Private employers are protected by federal overtime rules as long as the role of the employee in question did not expand from their outlined job duties. It is important to handle these types of circumstances in a professional capacity, as you do not want your business to be associated with overtime violations.
Other Types Of Employees That Are Exempt From Overtime Laws
Under the Fair Labor Standards Act (FLSA) in the United States, certain types of employees are exempt from overtime pay and other labor protections, regardless of whether they are paid a salary or an hourly wage. These exemptions include:
- Executive, administrative, and professional employees: These employees must perform certain duties and responsibilities that involve managing others, making significant business decisions, or using specialized knowledge, and they must be paid a salary of at least $684 per week to be exempt from overtime pay.
- Outside sales employees: These employees must spend the majority of their work time outside the employer’s place of business and must be primarily engaged in making sales or obtaining orders for products or services.
- Computer professionals: These employees must be highly skilled in the field of computers or information technology, and they must be paid a salary of at least $684 per week or an hourly rate of at least $27.63 to be exempt from overtime pay.
- Certain seasonal and recreational employees: Employees who work for certain seasonal or recreational establishments, such as amusement parks or ski resorts, may be exempt from overtime pay during their peak seasons.
- Certain transportation employees: Employees who work in certain transportation industries, such as trucking or airline operations, may be exempt from overtime pay under certain circumstances. These industries are often guided by their own work-life balance rules that ensure the employee is entitled to enough downtime outside of work.
- Independent contractors: Sometimes referred to as 1099 employees, independent contractors are hired for certain projects within an organization. 1099 employees do not need to be compensated overtime if their total hours are more than 40 in a given week. There are several rules regarding independent contractors that you should read up on prior to hiring a 1099 employee to help out at your business.
It’s important to note that simply being paid a salary or having a job title that suggests management or professional responsibilities does not automatically make an employee exempt from overtime pay. The determination of exempt status is based on a careful evaluation of an employee’s job duties and responsibilities.
What Else Is Outlined In The FLSA?
The federal overtime requirements are established by the Fair Labor Standards Act (FLSA) in the United States. Under the FLSA, non-exempt employees are entitled to overtime pay at a rate of at least one and a half times their regular rate of pay for any hours worked over 40 in a workweek.
In addition to the overtime pay requirement, the FLSA also establishes minimum wage requirements for most employees, as well as rules regarding child labor and record keeping.
The current federal minimum wage is $7.25 per hour, although most states and localities have established their own minimum wage rates that are higher than the federal rate.
The FLSA applies to most employers, but there are certain exceptions and exemptions for specific industries and types of employees. For example, certain types of employees, such as executive, administrative, and professional employees, are exempt from the overtime pay requirement if they meet certain criteria related to their job duties and responsibilities.
It’s important to note that some states and localities have their own overtime pay requirements and minimum wage rates that may be higher than the federal requirements. Employers are responsible for complying with all applicable federal, state, and local wage and hour laws.
How To Stay Compliant With Overtime Laws And Regulations
As a small business owner or manager, it is vital you stay compliant with federal regulations when it comes to compensation. Make sure your employees are well educated on their role and exemption status. If possible, have an HR representative sit down with them to review their job descriptions and what it means to be exempt or nonexempt.
My rule of thumb has always been to keep my employees happy whenever possible. If you are planning to assign extra work to a salaried employee, or would like them to participate in a certain project, make any additional compensation clear prior to the onset of the work. Even if they are an exempt salaried employee, offering them a one-time bonus or additional vacation time can go a long way in keeping your employee content.
Keep Your Hourly And Salaried Employees Happy
Speaking of keeping employees happy, have you checked in with your office environment lately? 68% of in-person employees report that their work environment directly impacts the length of their employment. A toxic workplace can be the start of a revolving door where it is difficult to recruit and retain new talent.
Check out our post on the 10 Signs Of A Toxic Workplace: A Checklist For Managers. This easy-to-follow guide can help you quickly spot areas of your business that may be signs of a toxic workplace, and offers guidance on how to make your business a better place to work.