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Calculating overtime pay for hourly and salaried employees

State and federal law requires workers in Texas to be paid at a rate of at least one and a half times their regular hourly rate when they work more than 40 hours in a workweek. Employers can offer their workers higher rates of overtime pay to encourage them to work more hours, but they cannot pay them less. Professional, administrative and executive employees and outside sales representatives are exempt from overtime pay rules, but only if they earn $684 or more per week.

The Fair Labor Standards Act

The rules dealing with overtime pay were established in 1938 when Congress passed the Fair Labor Standards Act. The law introduced the federal minimum wage and established a 44-hour workweek. The workweek was reduced to 40 hours when the FLSA was revised in 1940. Calculating overtime pay is fairly straightforward for hourly employees as it simply involves multiplying their standard hourly rate by one and a half. For example, if an employee is usually paid $10 per hour, their overtime rate would be $15 per hour.

Salaried employees

Calculating overtime pay is a little more complicated for salaried employees covered by the FLSA. In January 2021, the salary threshold for exemption from the overtime rules was increased from $455 to $684 per week. However, salaried employees who earn less than $684 per week are not entitled to overtime pay if they receive nondiscretionary bonuses that take their weekly income over the threshold. When a salaried employee is entitled to overtime and works more than 40 hours in a workweek, their salary and nondiscretionary bonuses are added together to calculate their weekly compensation. That figure is then divided by 40 to arrive at an hourly rate, which is then multiplied by one and a half to determine their overtime rate. Hourly or salaried workers who are not paid correctly when they work more than 40 hours in a workweek can file overtime compensation claims.

Overtime pay

All hourly workers and some salaried employees must be paid at a rate of at least one and a half times their standard pay rate when they work more than 40 hours in a workweek. Calculating overtime pay for salaried employees is more complicated because their salaries and nondiscretionary bonuses must be combined to determine their weekly compensation. Salaried employees who earn $684 or more each week are not covered by the overtime requirements of wage and hour laws.