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Salary & Overtime FAQs

Overtime Pay for Salaried Employees

If you are paid on a salary basis, you should receive the same amount of pay for each week that you work regardless of the numbers of days or hours you work.

For example: If your weekly salary is $500 per week (which breaks down to $12.50 per hour based on a 40 hour week) and you work 35 hours for the week, you should still receive $500 in wages if you are paid on a salary basis. If you are paid on an hourly basis, you would only receive $437.50 (35 hours x $12.50).

Many employers will say “If you are paid a salary you are not entitled to receive overtime pay.” If you have heard this from an employer, you are not alone. However, this is not necessarily true. The way an employee is paid does not determine their right to overtime pay. Rather, it is an employee’s job duties that determine if they are exempt from the overtime rules. Even if you were told that you would be paid a certain salary regardless of how much you work, you may still be entitled to overtime pay

Are Salaried Employees Entitled to Overtime Pay?

While some salaried positions may be exempt, the job position must meet specific exemption criteria for the position not to be entitled to overtime pay.

There are 3 common overtime exemptions that require an employee be paid on a salary basis:

Executive Exemption

Administrative Exemption

Professional Exemption

If you are paid on a salary basis but do not have the job duties listed under one of these exemptions, you are likely a non-exempt salaried employee and entitled to overtime pay. Contact an overtime law attorney today and get the legal help you deserve. 

The following describes how overtime is calculated under different salary pay structures:

Salary for Workweek Exceeding 40 Hours: An employee who is paid a fixed salary for a workweek longer than 40 hours is still entitled to overtime pay unless their position is exempt. For example, if an employee is hired to work a 45-hour workweek for a weekly salary of $500, the regular rate is calculated as follows: $500/45 hours = $11.11. Because the salary is deemed to compensate the employee at straight time for all hours worked, the employee is due half-time pay for hours worked over 40: $11.11/2 x 5 = $27.77

Fixed salary for fluctuating hours: This is the method that some companies in the past used to refer to informally as “Chinese overtime”. The regular rate of an employee will vary from week to week. 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. Since straight-time compensation has already been paid, the employee must receive additional overtime pay for each overtime hour worked in the week at not less than one-half this regular rate.

For example, if an employee is paid a salary of $500.00 per week on a fluctuating workweek basis and works 45 hours one week, their overtime pay is calculated as follows: $500/45 hours = $11.11 regular rate. Since their salary covers all hours worked at straight time, they are due half-time pay for hours worked over 40: $11.11 / 2 = $5.56 x 5 hours = $27.78.

To use this method:

  • the employee must have a work schedule with fluctuating hours, i.e., not be on a fixed schedule,
  • and must be paid a fixed salary that is meant to be straight-time compensation for all hours worked in a workweek, whether the employee works less than or more than 40 hours per week.
  • With almost no exceptions, no reduction in the salary may be made for short workweeks.
  • In addition, the salary must be large enough to ensure that the regular rate will never drop below minimum wage.

In May 2020, the Department of Labor has issued a new rule loosening the restrictions on employers’ use of the fluctuating workweek method (a/k/a “Chinese Overtime”) to calculate overtime pay for non-exempt salaried employees. 

Because this method results in employees getting less overtime pay than under any other overtime calculation, workers’ rights advocates did not want to encourage more employers to use the fluctuating workweek method. The new rule allows employers to pay additional compensation based on the number of hours worked, such as bonuses, premium pay, or differential pay, in addition to paying a fixed salary and still take advantage of the fluctuating workweek method.

The Obama DOL did not allow the use of these payments if the employer wanted to use the fluctuating workweek method because it felt it would encourage employers to shift a large portion of employee compensation to bonus and premium payments which are usually only offered for less desirable shifts or working longer hours.  This new rule will likely go into effect around July 2021.

Frequently Asked Questions About Salary & Overtime

I think I’m owed overtime pay, what should I do?

If you believe you are owed overtime pay, you can get a free and confidential review from a private attorney who handles overtime pay cases on a contingent fee basis. Given the workload and limited resources that are typical of government agencies, it is usually faster and more efficient to pursue your claim for unpaid overtime using your own lawyer. Either way, you should be prepared to provide information regarding your position, how many hours you work a week, how much you are paid, and any other payment information such as pay stubs.

How can I calculate what my overtime pay should be?

The calculation for overtime pay is your “regular rate of pay” x 1.5  x overtime hours worked. If you are paid hourly, your regular rate of pay is your hourly rate, however, if you are paid a salary, a day-rate, on commission, or if your compensation includes non-discretionary bonuses or other incentives, the determination of your correct regular rate of pay on which overtime should be calculated becomes more complex. In these instances, your regular rate should take into account these additional types of compensation.

How do I prove the amount of time spent working overtime?

The Fair Labor Standards Act requires employers to keep records of the amount of hours worked by each non-exempt employee. If your employer does not keep record of overtime hours, you can still pursue a claim for unpaid overtime wages. Because the law places the responsibility for keeping time records on employers, if the employer fails to do so, a presumption will be granted to the employee in regards to their testimony that they worked those extra hours. Additionally, an employee can use coworkers as witnesses and numerous forms of electronic evidence such as emails, computer logs, and/or security videos to support their testimony regarding the amount of hours typically   

If I am paid on a salary basis, can I still be entitled to overtime?

Many salaried employees are non-exempt and entitled to overtime pay. If you are a salaried employee who earns less than $684 each week, or your job duties do not meet the requirements for the executive, administrative, professional or other exemption, you are entitled to overtime pay if you work more than 40 hours a week.

What is the difference between exempt and nonexempt employees?

The main difference is that exempt employees are not entitled to overtime pay, while nonexempt employees are.

 

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