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Salaried Employee Overtime: Federal Tests and Pay Calculation

By Jason Seo, SHRM-CP®

Official sources checked: October 28, 2026

Does putting an employee on a salary mean you can ask for extra hours without paying overtime(overtime pay)? A hypothetical retail shop pays its office coordinator $34,000 a year and asks her to work 45 hours in a busy week. The owner assumes that a salary covers those hours without additional pay. Salaried employee overtime depends on the exemption rules and the pay agreement, not the word “salary” on the offer.

Raise this same coordinator's salary to $42,000 later without changing her duties. One obstacle disappears, but the employer still has to check the work she actually performs. That distinction determines both the amount owed and the records to keep.

For the most common federal exemptions, the executive, administrative and professional ones, an employee can be exempt(overtime-exemption classification) from overtime only if three things are true at once. They're paid a fixed salary, the salary is at least $684 a week ($35,568 a year), and their actual duties fit an exemption category such as executive, administrative or professional. If a covered employee fails those tests and no other exemption applies, federal overtime is due for hours over 40 in a workweek. Several states set a higher bar.

A few job types follow different rules. Outside salespeople and some licensed professionals, such as doctors, lawyers and teachers, have no salary test, and some computer employees can be exempt when paid at least $27.63 an hour.

Salary really is part of the test. The FLSA(federal wage-and-hour law)'s main white-collar exemptions require a "salary basis," which means a predetermined amount that doesn't shrink because the employee worked fewer hours in a given week. Hourly pay generally does not satisfy the salary-basis route for these exemptions; separate rules for certain professionals and computer workers still matter. So owners who connect salary with exemption have the first piece correct.

The belief also matches many real jobs. A general manager who runs the business, regularly directs at least two full-time employees, has real input on hiring and firing, and is paid well above the threshold will often meet the executive test. The trouble starts when the rule gets applied in reverse: "she's on salary, therefore she's exempt."

Start with the coordinator at $34,000 a year on salary. That's $653.85 a week, which is below the federal $684 weekly minimum. The pay is a salary, but the amount fails the ordinary federal salary-level requirement. Without another applicable exemption, the employer must treat this covered coordinator as non-exempt and pay the required overtime.

The salary floor has bounced around, which feeds the confusion. The Department of Labor tried to raise it in 2024, courts struck that rule down, and in May 2026 the agency formally restored the $684 figure. If you read an older article quoting $844 or $1,128 a week, that's the reason.

Now raise the same office coordinator to $42,000 a year, which is about $808 a week and comfortably above $684, while her duties remain unchanged. She schedules appointments, enters invoices, answers the phone and follows the procedures you set. She's salaried and above the floor, but the duties still need a separate review.

The duties test is where her exemption fails. The administrative exemption requires work that involves discretion and independent judgment on matters of significance. Following set procedures, however carefully, generally isn't that. So she's what the DOL calls salaried non-exempt: you may keep paying her a salary, but you owe overtime when she works more than 40 hours.

Both salary levels leave this coordinator non-exempt, but for different reasons. "Salaried" only answers the first gate. Here's the full check, with the federal numbers as of October 28, 2026.

One hypothetical employee at two salary levels. Duties analysis is fact-specific, so confirm with an employment attorney for real roles.

Federal law sets the minimum, and states can go further. For the common executive, administrative and professional exemptions, California requires a salary of at least twice the state minimum wage for full-time work, which is $70,304 a year in 2026. That means the $42,000 coordinator would fail California's salary test before anyone looked at her duties.

New York sets its own 2026 thresholds for executive and administrative employees: $1,275 a week in New York City, Long Island and Westchester, and $1,199.10 a week in the rest of the state. Those numbers don't apply to every professional role. New Jersey's rules point back to the federal Part 541 tests.

For the $42,000 coordinator, assume the written salary agreement covers 40 hours each workweek and there are no bonuses or other payments affecting the regular rate(rate used to calculate overtime). Those assumptions matter: dividing every salary by 40 without reading the agreement can produce the wrong result. This example does not apply the fluctuating-workweek method or a special industry rule.

Use weekly time records even if you issue a paycheck every two weeks. A week with 45 hours and a week with 35 hours still includes five overtime hours; averaging them to 40 does not remove the first week's obligation. Keep intermediate amounts unrounded in the calculation below.

The salary pays the first 40 hours under this agreement. The overtime line pays the five additional hours at one-and-a-half times the regular rate; adding only the half-time premium here would leave those hours partly unpaid. If you later pay a nondiscretionary bonus, review the regular rate again.

Suppose the same coordinator, now earning $42,000, worked 45 hours a week for 20 weeks before anyone noticed. If her salary is meant to cover 40 hours, her regular rate is about $20.19 an hour, so each overtime hour is worth about $30.29. Five overtime hours for 20 weeks comes to roughly $3,029 in back pay.

Under the FLSA, an employer that loses an overtime claim can owe an equal amount again as liquidated damages, which doubles that figure to about $6,058, plus the employee's attorney fees. Claims generally reach back two years, or three if the violation was willful. The math scales fast with more employees and more weeks. These figures assume her salary is meant to cover a 40-hour week; a different pay agreement changes the regular-rate math.

An employee agreement does not substitute for compliance with the overtime rules. Overtime rights under the FLSA can't be waived by agreement, even a signed one. An employee who happily accepts "salary, no overtime" can still file a claim later, and the agreement won't protect you.

The fix isn't necessarily switching to hourly pay. You can keep a salaried non-exempt employee on salary, track her hours, and pay overtime when she goes over 40. Many owners prefer that because the paycheck stays predictable in normal weeks.

Make a decision file for the coordinator with the current job description, actual tasks, pay agreement, work state and applicable salary threshold. Compare the facts with a specific exemption's duties requirements instead of choosing a category from the job title. Record why the role passes or fails and who reviewed an uncertain point.

If the role is non-exempt, set up time recording, explain overtime approval rules and test one 45-hour payroll before the change takes effect. A rule requiring approval does not erase payment for overtime actually worked. Resolve earlier unpaid hours separately rather than silently treating the new setup as a correction of the past.

There is also a year-end reporting step. The premium required by the FLSA for eligible non-exempt employees is separately reported on the 2026 W-2(employee wage statement); state-only extra pay is treated differently. Reconcile the corrected payroll to the no tax on overtime and 2026 W-2 guide after resolving the wage calculation.

A salary can be part of an exempt pay arrangement or part of a non-exempt one. For this coordinator, raising pay alone did not change her routine duties, so it did not establish the administrative exemption. The practical answer is to retain the salary if desired, record all hours and pay the overtime due under the actual agreement.

Before using a salary example, establish which hours the salary pays for and which earnings enter the regular rate. Consider a separate rounded example: a salaried nonexempt worker whose duties fail the exemption has an $800 weekly salary covering 40 hours. With no other included earnings and five overtime hours, the ordinary 40-hour method gives $20 an hour and $150 for those five hours, or $950 gross.

That arithmetic does not establish exemption or authorize a different salary arrangement. Keep the actual duties review and pay agreement with the calculation, then reconcile the amount already paid before issuing an adjustment.