Myth: You Don't Have to Pay Overtime If You Pay a Salary

One of the most commonly-encountered myths I come across in talking to my clients is the mistaken belief that paying a fixed salary avoids the need to pay overtime. Wrong. 

Overtime pay in the U.S. is complicated. Federal law has its own rules on who is owed overtime, and some states, like California, have additional rules. Broadly speaking, anyone who does not meet certain salary and duties thresholds* is owed overtime for hours over 40 worked in a workweek. If the employee fails to meet those salary and duties minimums, the employee must be paid overtime. 

This does not mean that you cannot pay a salary (as opposed to paying an hourly wage). You can pay a salary, but the overtime calculation will still need to performed. The specific verbiage you use to tell the employee what the salary covers will impact greatly how their overtime is calculated. This can result in significant differences in how much you must pay depending on how you refer to the salary. 

Reach out to learn more on this topic.

*There is an exception in limited circumstances, but discussion of that is beyond the scope of this post.