Overtime Pay For Salaried Employees

The law requires many, but not all, salaried employees to be paid overtime pay.  If you are salaried employee entitled to overtime pay, the overtime rate you must be paid depends on the number of hours you work or are expected to work, as is reflected in your salary. As with hourly workers, non-exempt payments, such as shift differentials and non-discretionary bonuses, must be included when calculating a salaried employee’s regular rate of pay.

A salaried worker’s overtime pay depends on whether the employee’s hours remain the same or fluctuate from week to week.

1. Fixed Number of Hours: The majority of salaried employees are paid based on a set, or fixed, number of hours each week. In such cases, the regular rate of pay must be calculated by dividing the employee’s total weekly compensation, including all non-exempt additional payments, by the total number of hours the employee is generally expected to work, as is reflected in his or her salary. For each hour worked in excess of 40 in an individual work-week, the employee must be paid the overtime rate of one and one-half times his or her regular rate of pay. For example, an employee paid a salary of $800 per week who generally works 40 hours a week would have a regular rate of pay of $20.00 per hour ($800/40 hrs). If the employee were to work more than 40 hours in any given week, his or her overtime rate of pay would be $30.00 per hour ($20 X 1.5) for each hour worked over forty.
2. Varying Number of Hours (Fluctuating Workweek): Some employers pay their workers a fixed salary, regardless of how many hours their employees work. This is known as the “Fluctuating Workweek.” This method of payment is allowed under the Department of Labor’s regulations provided that an agreement has been reached between the employer and the employee. In the existence of such an understanding, the employee must be paid only an additional “half-time” pay for each hour worked over 40. Nonetheless, some state courts and state overtime laws have ruled the “Fluctuating workweek” method of payment to be illegal and require employers to pay their salaried workers the extra “time and a half” overtime wage.