We get this question all the time from both employees and employers. Whether you have to pay overtime to an employee who receives an annual salary depends on whether they are classified as exempt or non-exempt under the Fair Labor Standards Act (FLSA). Just because you pay an employee an annual salary does not mean they are exempt from the overtime rules under the FLSA.
1. Exempt vs. Non-Exempt Employees
Exempt Employees:
- Do not have to be paid overtime.
- Must meet certain salary and job duties requirements.
Common exemptions include: Executive, Administrative, Professional, and some Computer-related positions. As of 2025, the salary threshold for exemption is $684 per week ($35,568 per year).
Non-Exempt Employees:
- Must be paid overtime for hours worked over 40 hours per week.
- Overtime must be at 1.5 times their regular hourly rate.
Just because someone is paid a salary does not automatically make them exempt.
2. How to Determine Overtime Pay
If the employee is non-exempt, you must calculate their effective hourly rate by dividing their salary by the number of hours they are expected to work. If they work over 40 hours in a workweek, they are entitled to 1.5 times their hourly rate for overtime.
3. State Laws May Differ
Some states have stricter overtime laws, but not here in Louisiana.
Bottom Line
If your employee is non-exempt, you must pay overtime. If they are exempt, you do not have to pay overtime, but they must meet salary and job duties tests. Would you like help determining if your employee qualifies in one of the categories of exempt employees? Contact Business Law Group today and schedule a consultation.
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