Overtime laws by state

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, record keeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments.

Per the Department of Labor, for covered, nonexempt employees, the Fair Labor Standards Act (FLSA) requires overtime pay to be at least one and one-half times an employee's regular rate of pay after 40 hours of work in a workweek.

• Some exceptions apply under special circumstances to employees of hospitals and nursing homes. Additionally, workplaces that are governed by unions may be exempt from the FLSA and will have separate overtime standards they'll need to follow.

Some states have their own overtime laws. In cases where an employee is subject to both the state and federal overtime laws, the employee is entitled to overtime according to the higher standard (ex. the standard that will provide the higher overtime pay).

• Extra pay for working weekends or nights is a matter of agreement between the employer and the employee (or the employee's union representative).

Your employees can be classified in different ways based on their salary and the type of work that they do. Once you determine your employee's correct classification, make sure their status is entered correctly in your account. If their status changes, you can update this in their employee profile.

• Keep in mind: Most employees are not exempt from overtime, and misclassifying your employees can result in decreased employee morale and having to pay historical wages.

If you're not sure how your employees should be classified, the Department of Labor has published some helpful guidelines.

• Customers on Gusto's Plus and Premium plan have access to HR Pros who can help navigate tricky wage/hour rules—upgrade your plan at any time.

Generally, there are three classifications: 

Hourly/Eligible for overtime (Hourly/Non-exempt)

Earns wages based on the number of hours the employee works and earns overtime pay when applicable. This is the most common classification, as most employees in the U.S. are required to be paid at least the federal minimum wage for all hours worked plus overtime pay at one and one-half times the regular rate of pay for all hours worked over 40 hours in a workweek. 

Note that minimum wage requirements can vary by state. 

Salary/Eligible for overtime (Salary/Non-exempt)

Earns a fixed salary if they work 40 hours or less per week. Earns overtime if they work more than 40 hours per week (regulations vary per state). 

Salary/No overtime (Salary/Exempt)

Earns a fixed salary regardless of how many hours the employee works. Some employees may be exempt from overtime pay if they're employed as an executive, administrative, professional, or outside sales, as well as certain computer employees. However, job titles alone do not determine exempt status.

To be exempt from overtime, employees-specific job duties must meet a certain set of requirements, and they generally should be paid a salary of at least:

• Until June 30, 2024: $684 per week (equivalent to $35,568 per year for a full-year worker)
• From July 1, 2024 - December 31, 2024: $844 per week (equivalent to $43,888 per year)
• January 1, 2025 and forward: $1,128 per week (equivalent to $58,656 per year)

Note: Salaried employees are not eligible for overtime pay.

• Keep in mind: The DOL permits employers to use non-discretionary bonuses and incentive payments (commission wages, sales incentives, and other rewards), as well as housing allowances for certain ministers/pastors, to satisfy up to 10 percent of the standard salary level.
  • If you have an employee that's receiving a commission or other types of incentive payments to help meet the standard salary level, check the box in their Gusto account, "This employee will receive commissions or other types of additional compensation."
    • Commissions and other types of additional compensation can be added each time payroll is run.

Commission Only/Eligible for overtime (Commission Only/Non-exempt)

Earns wages based only on commission. Commission only employees need to make at least minimum wage for hours worked.

• If you have your payroll on Autopilot®, you'll need to enter a commission before the payroll runs—they're set to a $0 salary in Gusto, so they will not be paid if no commission is entered. 

Commission Only/No overtime (Commission/Exempt)

Earns wages based only on commission. Some employees may be exempt from overtime pay if they're employed as an executive, administrative professional, or outside sales, as well as certain computer employees. However, job titles alone do not determine exempt status. 

To be exempt from overtime, employees specific job duties must meet a certain set of requirements, and they generally should be paid at leaston a salary basis of: 

• Until June 30, 2024: $684 per week (equivalent to $35,568 per year for a full-year worker)
• From July 1, 2024 - December 31, 2024: $844 per week (equivalent to $43,888 per year)
• January 1, 2025 and forward: $1,128 per week (equivalent to $58,656 per year)
• If you have your payroll on Autopilot®, you'll need to enter a commission before the payroll runs—they're set to a $0 salary in Gusto, so they will not be paid if no commission is entered. 

S-Corp owners

Review this article to set up an employee as an S-Corporation owner.

When you update default hours, this amount will automatically appear for your salaried employee every time you run payroll. Updating default hours will not change the employee’s gross pay per pay period—this is useful if your employee does not work a standard 40-hour workweek.

Note: The default hours you add will be per pay period to align with the pay schedule your company has set up.  

Add default hours for salaried employees

1. Click the People section and select Team members. 
2. Click your employee’s name.
3. Go to the Pay tab.
4. Scroll to the Compensation section and click edit next to "Default hours."
   • If you do not see this section, you may not have the required admin permissions. Reach out to the primary admin on the account to update your permissions.
5. Enter your employee's default hours to be reported per pay period.
6. Click Save.

The next time you run payroll, your employee's default hours will be entered automatically. You can change this amount while running payroll if your employee worked more or less than the default number of hours set.

If you do not set a custom default hours, the default hours recorded on payroll for salaried employees will be calculated based on the number of company pay periods in the year and the standard of 2,080 annual working hours.

The list below contains the different pay periods and their corresponding default hours set for salaried employees.

• Every week: 40 hours
  • 52 pay periods
• Every other week: 80 hours
  • 26 pay periods
• Twice a month: 86.67 hours
  • 24 pay periods
• Monthly: 173.33 hours
  • 12 pay periods

You can also edit these hours in payroll if they need to be adjusted for the pay period.

Example: There's a total of 2,080 working hours per year. Joe is paid every other week, for a total of 26 pay periods in the year. 2,080 total annual hours divided by 26 pay periods equals 80 hours per pay period.

Types of Overtime

The federal baseline for overtime is 1.5 x RRP (regular rate of pay) for all hours over 40 in a week.

State Overtime Laws

Full-time employees

Standard full-time hours are determined as 8 hours per day x 40 hours per week x 52 weeks in a year = 2080

• Annual salary / annual hours (2080 standard full-time hours)
  
  • Example: $45,000 salary / 2080 standard hours = $21.63 hourly rate

Part-Time Employees

Annual salary / total annual hours (# of hours worked x 52 weeks)

• Example: Employee works 25 hours per week
  • 25 x 52 = 1,300 hours
  • Annual salary: $45,000
  • $45,000/1,300 = $34.61 hourly rate

Daily Overtime (OT) and Double Time (DT) calculations

More than 8 hours in a single workday:

• OT in excess of 8 hours
• Total single-shift hours less than or equal to 12 hours – 8 = time paid at overtime rate

More than 12 hours in a single workday:

This example is related to California's state overtime rules. Refer to the table for your state overtime rules. 

• DT in excess of 12 hours
• Total single-shift hours more than 12 hours = time paid at double-time rate

Seven days in a row within a single pay period:

• OT after working 8 hours on the 7th day
• Total hours over 40 worked in a workweek (excluding any time worked on the 7th consecutive day of work) = time paid at the overtime rate
• All hours up to 8 hours worked on the 7th day of the workweek = time paid at the overtime rate

Note: If your employee earns additional earnings, they may be included in overtime calculations. To learn more, view our article on how to calculate the regular rate of pay.