What Is an Hourly Employee?

By

Updated on October 26, 2022

Florist working at laptop in flower shop — Photo: Hero Images / Getty Images

Definition

An hourly employee is paid a wage for each hour worked during a workweek. An hourly employee is paid for the number of hours they work per week at a determined rate.

Key Takeaways

Hourly employees are paid a wage for each hour of work they complete.
They must be paid at least the minimum wage per hour based on state or federal guidelines—whichever is higher.
They're usually considered non-exempt employees and must be paid overtime wages starting after 40 hours of work in a week.
Whether hourly workers qualify for benefits depends on the policies of their employer.

How Does Being an Hourly Employee Work?

An hourly employee is paid for the number of hours they work per week at a determined rate. Per federal law, hourly workers are entitled to overtime pay for hours worked over 40 hours per workweek.

Employees paid on an hourly basis are paid for actual hours worked. Unlike many salaried employees, hours per week may fluctuate based on a worker’s weekly schedule or rotated shifts, and therefore wages can vary for that employee from week to week.

Workers who are paid on an hourly basis are required to be paid minimum wage at the least. These rates vary from state to state, and employers are required to pay either the state or federal minimum wage—whichever is higher.

Note

Each state department of labor website offers details about the minimum wage in that area.

Example of an Hourly Employee

If you're an hourly employee, you'll be paid at least the minimum wage for every hour you work. The federal minimum wage is $7.25 per hour for covered, non-exempt employees. Some states have a higher minimum wage rate.

For example, if your pay rate is $10 an hour and you work 40 hours in a workweek, you'll be paid $400. If you work overtime, you'll be paid $15 per hour (time and a half) for the hours you work over 40. If you work 45 hours, you'll earn $475 that week—$400 in regular pay and $75 (5 hours at $15 an hour) in overtime.

Overtime Pay for Hourly Employees

There are differences between classifications of employees based on the type of work they do and their eligibility for overtime pay.

Exempt employees are not entitled to the enforced provisions of the Federal Labor Standards Act (FLSA), such as overtime pay. As of January 1, 2020, a worker can only be designated as an exempt employee if they are paid at least $684 per week ($35,568/year) or they work in an occupation that is exempt from overtime pay provisions.

Non-Exempt Employees

Non-exempt employees must be paid both minimum wage and overtime pay for any time worked beyond 40 hours in any given workweek. According to the FLSA, non-exempt employees are entitled to 1.5 times their hourly wage for every hour of overtime they work.

The majority of people working an hourly wage are considered non-exempt employees. Most non-exempt employees in the U.S. are offered employment “at will,” meaning that both they and the employer can terminate the professional relationship at any time for any reason, so long as it is not discriminatory.

There are certain tests to determine exempt versus non-exempt status that apply to executive, administrative, and professional employees, as well as workers in certain positions, including computer and outside sales jobs.

If workers meet these tests and the income criteria, they’re considered exempt, meaning that overtime provisions don’t apply to them. Typically, exempt employees will not earn any extra payment for hours worked over a standard workweek.

Exempt Employees

Exempt employees are not entitled to the enforced provisions of the Federal Labor Standards Act (FLSA), such as overtime pay. As of January 1, 2020, a worker can only be designated as an exempt employee if they are paid at least $684 per week ($35,568/year).

State Overtime Rules

There are some states with regulations governing overtime pay. In locations where an employee is subject to both state and federal overtime laws, overtime is paid according to the standard that will provide the higher amount of pay.

Company Policy

Some employers, however, may voluntarily pay exempt employees some compensation for additional hours, but they must remain compliant with laws related to these payments. Examples of additional compensation can include bonuses, flat sums, and additional paid or unpaid time off.

Additionally, an employer can determine a standard workweek for their own company, and not necessarily the 40-hour workweek expected of non-exempt employees. For instance, a financial company may establish a standard workweek to be 60 hours for exempt employees, while a department store may only require 30 hours.

Frequently Asked Questions (FAQs)

Do hourly workers receive employee benefits?

Depending on company policy, hourly workers may be entitled to employee benefits, including vacation, sick time, life insurance, and health care for themselves and their families. In some cases, these benefits and the employer’s contribution may be less than those offered to salaried employees.

Some businesses designate qualifying periods anywhere from thirty days to three months before offering benefits packages to make sure that the employee is a good fit for the company and will stay long enough to make the organization’s investment worthwhile.

How much overtime pay do hourly employees receive?

The Fair Labor Standards Act (FLSA) requires covered, non-exempt hourly employees to be paid one and a half times their regular rate of pay for every hour worked over 40 in a workweek. For example, if a worker is paid $15 per hour, they would receive $22.50 for every hour of overtime worked.

Was this page helpful?

Thanks for your feedback!

Tell us why!

Sources

The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.