Do salaried employees get overtime pay?
Do your salaried employees burn the midnight oil on a regular basis? You could be on the hook to pay them overtime.
Read on to learn whether and when you need to pay salaried employees overtime.
Are all employees entitled to overtime pay?
No. The Fair Labor Standards Act defines rules for who is and is not entitled to overtime pay. Overtime pay is the amount an employer pays an employee for hours worked over 40 hours in a given week.
The main rule is that non-exempt employees are eligible for overtime pay. This is to say that employers must pay most non-exempt employees “time and a half,” a.k.a overtime. Most exempt employees are excluded from the overtime pay rule. In other words, they are not entitled to overtime pay.
What’s the definition of a salaried employee?
One of the keys to classifying an employee as exempt versus non-exempt is that he must work on a salary basis.
The FLSA defines a salaried employee as one who receives a fixed amount of income each pay period. That pay period could be weekly or on a less frequent basis. But he must receive the same fixed pay for any week during which he performs any work. This is true regardless of the number of days or hours in a week he works.
When do you have to pay a salaried employee overtime?
It’s true that exempt employees work on a salary basis. But don’t assume that all salaried employees are exempt employees. You may still have to pay salaried employees overtime if:
- They earn less than $455 per week ($23,600 per year) on a 40-hour-per-week schedule. Exempt, salaried employees must earn at least $455 per week.
- They occupy non-exempt professions or roles. The exemption only applies to certain white-collar jobs and high-level roles. Outside sales employees and some computer professionals are examples of exempt jobs. Exempt roles include executive, administrative and professional roles. But you may owe overtime to people who do non-exempt work. An example of a non-exempt employee is an inside sales employee. A police detective is another.
- You reduce their pay because of operating conditions, workload or work quality changes. The fixed pay of exempt employees shouldn’t shrink even if their work volume or quality goes down. Employees whose pay you dock because of operating conditions or workload aren’t salaried.
What are some exceptions to paying salaried employees overtime?
Let’s say that your salaried employee does not meet the conditions to be exempt. You still might not owe your salaried employees overtime if:
- Their professions are not covered by the FLSA. As an example, movie theater employees are not covered. Railroad workers and some farm workers are not covered. These roles fall under the FLSA because other associations govern these workers. The Motor Carriers Act governs truck drivers. So, they’re not covered by the FLSA.
- They don’t actually work overtime. The trigger for overtime pay is that an employee actually works over 40 hours. So you won’t owe overtime if you ensure that he never works overtime.
- They’re high earners. Employees who earn $100,000 or more in a year qualify for exemption from overtime.
The Growth Center does not constitute professional tax or financial advice. You should contact your own tax or financial professional to discuss your situation.