Employees paid on an hourly basis are paid for actual hours worked. Unlike many salaried employees, hours per week may fluctuate based on a worker’s weekly schedule or rotated shifts, and therefore wages can vary for that employee from week to week. Workers who are paid on an hourly basis are required to be paid minimum wage at the least. These rates vary from state to state, and employers are required to pay either the state or federal minimum wage—whichever is higher.
Example of an Hourly Employee
If you’re an hourly employee, you’ll be paid at least the minimum wage for every hour you work. The federal minimum wage is $7.25 per hour for covered, non-exempt employees. Some states have a higher minimum wage rate. For example, if your pay rate is $10 an hour and you work 40 hours in a workweek, you’ll be paid $400. If you work overtime, you’ll be paid $15 per hour (time and a half) for the hours you work over 40. If you work 45 hours, you’ll earn $475 that week—$400 in regular pay and $75 (5 hours at $15 an hour) in overtime.
Overtime Pay for Hourly Employees
There are differences between classifications of employees based on the type of work they do and their eligibility for overtime pay. Exempt employees are not entitled to the enforced provisions of the Federal Labor Standards Act (FLSA), such as overtime pay. As of January 1, 2020, a worker can only be designated as an exempt employee if they are paid at least $684 per week ($35,568/year) or they work in an occupation that is exempt from overtime pay provisions.
Non-Exempt Employees
Non-exempt employees must be paid both minimum wage and overtime pay for any time worked beyond 40 hours in any given workweek. According to the FLSA, non-exempt employees are entitled to 1.5 times their hourly wage for every hour of overtime they work. The majority of people working an hourly wage are considered non-exempt employees. Most non-exempt employees in the U.S. are offered employment “at will,” meaning that both they and the employer can terminate the professional relationship at any time for any reason, so long as it is not discriminatory. There are certain tests to determine exempt versus non-exempt status that apply to executive, administrative, and professional employees, as well as workers in certain positions, including computer and outside sales jobs. If workers meet these tests and the income criteria, they’re considered exempt, meaning that overtime provisions don’t apply to them. Typically, exempt employees will not earn any extra payment for hours worked over a standard workweek.
Exempt Employees
Exempt employees are not entitled to the enforced provisions of the Federal Labor Standards Act (FLSA), such as overtime pay. As of January 1, 2020, a worker can only be designated as an exempt employee if they are paid at least $684 per week ($35,568/year).
State Overtime Rules
There are some states with regulations governing overtime pay. In locations where an employee is subject to both state and federal overtime laws, overtime is paid according to the standard that will provide the higher amount of pay.
Company Policy
Some employers, however, may voluntarily pay exempt employees some compensation for additional hours, but they must remain compliant with laws related to these payments. Examples of additional compensation can include bonuses, flat sums, and additional paid or unpaid time off. Additionally, an employer can determine a standard workweek for their own company, and not necessarily the 40-hour workweek expected of non-exempt employees. For instance, a financial company may establish a standard workweek to be 60 hours for exempt employees, while a department store may only require 30 hours. Some businesses designate qualifying periods anywhere from thirty days to three months before offering benefits packages to make sure that the employee is a good fit for the company and will stay long enough to make the organization’s investment worthwhile.
