As of January 1, 2025, the standard minimum salary for most exemptions is $1,128 per week, which equates to $58,656 annually. The salary level test mandates that an employee’s salary meet a minimum threshold set by federal law. If you assigned an employee a salary based on a 40-hour workweek, don’t make them work 55 hours every week; otherwise, you could find yourself with a serious employee retention problem.

For example, say you have an employee who is paid $1000 every week. First, let’s look at  the difference between salary and hourly pay. Some are exempt from FLSA requirements, but in a few Sales And Collection Cycle important cases, you still need to consider how you pay them for their labor.

An employee who is paid salary is one who makes consistent pay on a regular basis. If you don’t pay your employees fairly for the work they do, you’re not only breaking the law, but damaging your organization’s health. Only actual job duties and compensation determine exemption status, not titles. But without overtime compensation, they may end up earning less despite working more hours. Manual laborers and non-managerial staff don’t qualify for exemption even if they earn a high salary.

Some employers use fluctuating workweeks or guaranteed minimums to avoid overtime; however, improper use of these methods can violate the FLSA. Employees outside these categories, or who do not meet the salary basis requirement, are typically nonexempt and must be paid overtime. The salary basis test generally requires a minimum weekly salary, while the duties test evaluates primary job responsibilities. This article explains how overtime eligibility is determined, common misconceptions, and practical steps for both employers and employees to ensure compliance and fair compensation.

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• However,  according to Morgan Lewis law firm, a federal court in Texas vacated the entire 2024 rule, rendering the new thresholds invalid nationwide.
• Therefore, it is possible that a salaried employee can still qualify for overtime, either by not earning a high enough salary or by not meeting the applicable job duties test.
• The FLSA provides specific exemptions based on job duties and salary level.
• This method requires a clear mutual understanding between the employer and employee that the fixed salary covers all hours worked.
• Many people believe that being a “part-time” employee automatically means they cannot earn overtime pay.
• 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.
• You may take the standard deduction or itemize deductions in addition to the No Tax on Overtime deduction.

This applies for each hour worked over 40 hours in a given workweek. At the federal level, the minimum wage is $7.25 per hour, however many states have set their own higher minimum wages. With a salary agreement, the employee may work less based on business needs without affecting their paycheck.

Stay informed about regulatory changes at federal and state levels

If you work more than five hours in a row, you are entitled to a 30-minute meal break. For that reason, a respectful conversation with the employer, making reference to your accurately recorded times, may be the best first step. Additionally, an employee’s primary job responsibilities must fall into specific categories, such as executive, administrative, professional, computer, or outside sales roles.

Job titles don’t determine exempt status – actual job duties do. The following table breaks down the essential data and context surrounding America’s unpaid overtime epidemic. Unpaid overtime is a pervasive issue in the United States, amounting to a multi-billion dollar form of wage theft that affects millions of workers annually. Many workers assume that being on a salary means they aren’t entitled to overtime. For instance, executive duties typically involve managing an enterprise or a department, regularly directing the work of at least two employees, and having the authority to hire or fire. While many salaried positions are not eligible, exceptions exist that can make a salaried individual eligible for additional compensation when working beyond standard hours.

Key Takeaways for Are Salaried Employees Entitled To Overtime

Several states have established overtime rules that are stricter than the federal standard. When an employee is covered by both federal and state wage laws, the law that is more favorable to the employee applies. The FLSA outlines several “white-collar” exemption categories, each with its own specific duties test. Next is the Salary Level Test, which sets a minimum salary an employee must earn. The first is the Salary Basis Test, which requires that an employee receive a fixed, predetermined salary each pay period.

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Her title sounded managerial, but her duties involved stocking shelves and running a register. Consider Jamie, a salaried assistant manager at a retail store. What happens if you’re wrongly classified as exempt? Federal law sets a baseline, but many states impose stricter rules.

Computer Employee Exemption

The deduction is not available to married couples who file separate tax returns. Single filers whose MAGI is $275,000 or above—or $550,000 or higher for married couples filing jointly—are not eligible for any part of the No Tax on Overtime deduction. The No Tax on Overtime deduction starts to phase out for single filers with a MAGI of $150,000 or higher ($300,000 for joint filers).

This status is not based on job title or part-time designation but on specific criteria set by the FLSA. This period does not have to align with a standard calendar week; an employer can set it to start on any day and at any time. Failure to adhere to state laws can result in penalties, including back pay and fines.

For any hours beyond 40, you must be paid $30/hour (time and a half). If you are non-exempt and worked the hours, you must cash flow statement template for excel be paid, period. Misclassification of salaried employees is a common problem. This method requires a clear mutual understanding between the employer and employee that the fixed salary covers all hours worked.

Other states might have weekly thresholds lower than the federal 40-hour standard or have specific rules for working on the seventh consecutive day of a workweek. Employers are legally required to follow the law—whether federal or state—that provides the greater benefit to the employee. While the FLSA provides a national standard, states can enact their own, more protective overtime laws. A workweek under the FLSA is a fixed and consistently recurring period of 168 hours, which translates to seven consecutive 24-hour periods. However, an employee’s eligibility for overtime is not determined by a part-time or full-time label.

• Here’s what you need to know about the new “No Tax on Overtime” deduction.
• Five overtime hours would be paid at $37.50/hour, earning you an extra $187.50 that week.
• In fact, many salaried employees are still entitled to overtime pay depending on how much they earn and what kind of job duties they perform.
• This change has extended overtime eligibility to an estimated 4.3 million additional workers across the United States.
• That same salaried employee must also make at least $35,568 per year or $684 per week to qualify for overtime exemption.
• A 2025 survey found that 62% of salaried workers are unaware of their potential eligibility for overtime pay.

Exempt employees do not qualify for overtime pay, regardless of salary. If you earn less than this on salary, you generally must be paid overtime when you work over 40 hours, regardless of your job title. ●      Long hours are expected as part of the job, but you never get overtime pay If either test is not satisfied, the employee is non-exempt and must be paid overtime when working over 40 hours. Being salaried doesn’t automatically exempt someone from overtime – exempt status depends on both job duties and meeting certain salary criteria.

If you are a non-union employee, the answer is probably yes – most employees in BC are entitled to overtime pay. Salaried employees are typically paid on a “salary basis,” meaning they receive a fixed amount regardless of hours worked. It is a common misunderstanding that receiving a salary automatically disqualifies an employee from earning overtime pay.

Because this decision is under appeal, the salary level is subject to change. This figure was affirmed by a federal court in late 2024, which blocked a Department of Labor rule that would have significantly increased it. If money has been deducted from your salary, it will therefore be critical how, why, and how often said deductions were made. The previously described jobs are generally considered to be white-collar in nature. This amount cannot be reduced because of changes in the employee’s work quality or quantity. The Fair Labor Standards Act (FLSA) requires this, along with the laws in each state.

As an employer, under the FLSA, you have the right to terminate any employee that refuses to work overtime—including salaried employees. The Federal Fair Labor Standards Act overtime exemptions are based on job duties, with the primary duty and responsibilities of a role determining whether that role qualifies for an exemption. Are salaried employees eligible for overtime?

Under the FLSA, certain salaried employees may be considered exempt, meaning they do not qualify for overtime pay. This article will explore the fundamentals of labor laws, how overtime applies to salaried employees, and the implications of upcoming federal law changes in 2025. These employees are entitled to a minimum wage of $7.25 per hour (depending on the state) and overtime pay at no less than 1.5x their regular hourly rate of pay.

There is no special tax rate on overtime pay. Some states have higher minimum salary thresholds or more stringent duties tests than federal law. While the FLSA sets federal overtime standards, states can enact their own wage and hour laws. The regular rate is calculated by dividing the weekly salary by the number of hours actually worked.