Salary Does Not Always Mean Exempt: What Employers Should Know About Overtime Rules
Paying an employee a salary does not automatically make them exempt from overtime. Employers should review both salary and job duties to help avoid wage claims, audits, and payroll compliance issues.
Under wage and hour rules, employees generally must meet specific requirements to be considered exempt from overtime. These requirements usually include both a salary threshold and a duties test. In other words, how an employee is paid matters, but so does the actual work they perform.
An employee may receive a salary and still be eligible for overtime if their job duties do not meet the requirements for an exemption. Job titles alone are not enough to determine exempt status. Employers should look closely at the employee’s day-to-day responsibilities, level of decision-making authority, and role within the organization.
Misclassifying employees can lead to serious consequences, including back pay, penalties, wage claims, and audits. It can also create confusion and frustration for employees if overtime expectations are not clearly communicated.
To help reduce risk, employers should periodically review employee classifications, especially when job responsibilities change, new positions are created, or compensation structures are updated. Keeping accurate job descriptions and payroll records can also help support compliance.
Payroll compliance can be complex, but reviewing employee classifications is an important step in protecting your business and your team. Kemper 1st Choice Payroll can help employers better understand payroll processes, wage and hour considerations, and compliance-related payroll needs.
Have questions about payroll compliance or employee classifications? Contact us to learn how we can help.