How do you calculate overtime pay in Texas?

Calculating overtime pay accurately is crucial for both employers and employees to ensure fair compensation and compliance with labor laws. In Texas, the Fair Labor Standards Act (FLSA) governs the overtime regulations of the state. Understanding the correct methods for calculating overtime helps payroll errors, and potential disputes, and ensures adherence to legal requirements.

This article provides a comprehensive guide on how to calculate overtime pay in Texas, addressing various scenarios and providing practical examples to help navigate these calculations effectively.

This Article Covers

Understanding Overtime in Texas
Overtime for Hourly and Salaried Employees in Texas
Overtime for Complex Pay Structures in Texas
Additional Considerations for Texas Overtime

Understanding Overtime in Texas

Which Overtime Laws Apply in Texas?

Texas state laws do not cover overtime, so federal regulations apply. The federal Fair Labor Standards Act (FLSA) governs overtime with the following key points:

  • Non-exempt employees must receive overtime pay for any hours worked beyond 40 in a workweek.
  • Overtime pay is required to be at one and a half times the regular pay rate.
  • Working on weekends, nights, or holidays does not automatically qualify as overtime unless it involves extra hours worked during these periods.
  • There are no limits on the number of hours an employer can require an employee to work.
  • The FLSA operates on a weekly basis, defined as seven consecutive 24-hour periods. Weekly schedules do not necessarily align with the calendar week. Employers have the flexibility to establish workweeks for their employees based on their business needs.

How are Overtime Laws in Texas Different from Federal laws?

Overtime laws in Texas are governed by federal regulations under the FLSA, as the state does not have specific overtime laws. Both Texas and federal laws require non-exempt employees to receive 1.5 times their regular pay rate for hours worked beyond 40 in a workweek. Texas follows the FLSA’s definition of a workweek, which can start on any day.

How Much is Overtime Pay in Texas?

In Texas, overtime pay is calculated at 1.5 times the employee’s regular rate of pay for any hours worked over 40 in a workweek. This rate is mandated by the FLSA and applies to most non-exempt employees.

For example, the minimum wage in Texas is $7.25, and the overtime rate would be $10.88 per hour ($7.25 x 1.5) for any hours worked beyond the 40-hour threshold.

If you want to learn more, check out our guide on Texas overtime laws. 

Who is Eligible for Overtime Pay in Texas?

Employees in Texas are classified as either exempt or non-exempt when it comes to overtime. Non-exempt workers, who are usually paid hourly and perform jobs involving manual labor or customer service, are eligible for overtime pay, provided they are at least 16 years old.

Check out our guide on overtime rights in Texas.

Who is Exempt from Overtime Pay in Texas?

In Texas, overtime regulations are governed by the FLSA since there are no state-specific overtime laws. The FLSA outlines various employee categories that are exempt from overtime pay.

Exempt employees work in “white-collar” positions such as professional, administrative, or executive roles or as salespersons. However, it is not just the job title that determines exemption. Employees must also meet specific criteria assessed through three tests:

  • Salary Basis Test: Employees must receive a consistent salary, irrespective of hours worked or work completed, meaning they should be salaried rather than hourly.
  • Salary Test: The employee’s salary must meet a minimum threshold. As of 2024, the FLSA has set the minimum threshold at $844 per week or $43,888 annually.
  • Duties Test: The employee’s primary duties must involve administrative, professional, or executive functions requiring discretion and independent judgment.

Other job categories exempt from overtime include:

  • Airline employees
  • Babysitters
  • Commissioned sales employees
  • Computer professionals
  • Drivers and loaders
  • Live-in domestic employees
  • Farmworkers on small farms
  • Federal criminal investigators
  • Fishermen
  • Outside sales employees
  • Railroad employees
  • Salesmen and mechanics
  • Switchboard operators

What is the Regular Rate of Pay in Texas?

The regular rate of pay is the amount an employee earns per hour worked and must be at least the set minimum wage. In Texas, the minimum wage is $7.25 per hour. For hourly employees, calculating this rate is straightforward as it matches their standard hourly wage. However, for other types of employees, to determine their regular hourly rate:

  • Salaried Employees: Calculate the weekly salary by the standard 40-hour workweek to find the hourly rate.
  • Piecework or Commission Employees: There are three ways to calculate their regular rate: using the rate per piece or commission, dividing the total earnings for the workweek by the number of hours worked, and for group work, calculating the group rate by dividing the total number of pieces by the number of people in the group, then multiply this rate by the hours each person worked to determine their hourly rate.

Overtime for Hourly and Salaried Employees in Texas

How do you Calculate Overtime for Hourly Employees in Texas?

To calculate overtime hours for hourly employees in Texas:

  • Determine the employee’s regular hourly rate: This is typically their base hourly wage.
  • Calculate the employee’s overtime rate: Multiply the regular hourly rate by 1.5 to determine the overtime rate. For example, if an employee’s regular rate is $20 per hour, their overtime rate would be $30 per hour ($20 x 1.5).
  • Identify overtime hours: count the total number of hours worked beyond 40 in a workweek. Only these hours qualify for overtime pay.
  • Calculate overtime pay: Multiply the overtime hours worked by the overtime rate. For instance, if an employee worked 5 hours of overtime in a week, and the overtime rate is $30 per hour, the overtime pay would be $150 (5 hours x $30).
  • Combine pay: Add the regular pay (for hours worked up to 40) and the overtime pay to get the total weekly pay. For example, if the employee worked 40 regular hours at $20 per hour and 5 overtime hours at $30 per hour, their total weekly pay would be $950 ($800 regular pay + $150 overtime pay).

To learn more, you can read our guide on Your Rights as an Hourly Employee in Texas.

How is Overtime Calculated for Salaried Employees in Texas?

To calculate overtime for salaried employees in Texas:

  • Determine the regular rate of pay: Divide the weekly salary by 40 to get the regular hourly rate. If an employee works 40 hours per week and is paid $1,200 weekly, then their regular rate of pay would be $30 per additional hour.
  • Calculate the regular rate of pay: Multiply the regular hourly rate by 1.5 to find the overtime rate. Using the $30 hourly rate, the overtime rate would be $45 per hour (30 x 1.5).
  • Identify overtime hours: Count the total number of hours worked beyond 40 in a workweek. Only these hours qualify for overtime pay.
  • Calculate overtime pay: Multiply the number of overtime hours by the overtime rate. For example, if the employee worked 10 overtime hours, the overtime pay would be $450 ($10 hours x $45).
  • Combine pay: Add the regular pay and the overtime pay to get the total weekly pay. For example, if the total weekly salary is $1,200 and the overtime pay is $450, the total weekly pay would be $1,650.

For more details, check out our guide on Your Rights as a Salaried Employee in Texas.

How do you Calculate Overtime for Seven Consecutive Working Days in Texas?

Texas does not have a specific provision for overtime for seven consecutive working days. The calculation of overtime typically follows a standard workweek of 40 hours rather than a rolling seven-day period. To calculate overtime, you have to:

  • Determine the employee’s regular hourly rate and calculate the overtime rate, which is one and a half (1.5) times the regular rate. For example, if the employee’s regular hourly rate is $10 per hour, their overtime rate would be $15 per additional worked hour.
  • Identify any hours worked beyond 40 within the seven consecutive working days. Only these hours qualify for overtime pay. If the employee worked 46 hours within the seven consecutive days, the employee is entitled to receive overtime compensation for the six hours worked.
  • Multiply the overtime hours by the overtime rate to determine the total of the overtime pay. For example, if the employee worked 46 hours in a seven-day period, six of which were overtime hours, and the overtime rate is $15 per hour, the overtime pay would be $90 (6 hours x $15).
  • Add the regular pay (for the first 40 hours) and the overtime pay to get the total pay for the seven days. If the employee’s regular hourly rate is $10 per hour and they worked 46 hours total, their total pay would include both regular pay for 40 hours ($400) and overtime pay ($90), totaling $490.

Overtime for Complex Pay Structures in Texas

How do you Calculate Overtime for Piece Rate or Commission Employees in Texas?

In Texas, employees who earn commissions are entitled to overtime pay just like other non-exempt employees. When calculating overtime, commissions must be included in the employee’s total wages. However, the overtime rate is half of the regular rate.

Let’s have this as an example: An employee works 45 hours a week. The employee is paid $10 per hour and earns $100 in commissions. Here’s how you can calculate the commissioned employee’s overtime:

  • Calculate the employee’s weekly wage by multiplying the total hours worked by the hourly and adding their earned commission. The employee’s weekly wage would be $550 (45 hours x $10 = $450 + 100 = $550).
  • Determine the employee’s new hourly rate by dividing the amount by the total hours worked. The employee’s new hourly rate would be $12.22 ($550 / 45 = $12.22).
  • Calculate the overtime rate by multiplying the new regular hourly rate by half (0.5). The overtime rate would be $6.11 ($12.22 x 0.5 = $6.11).
  • Calculate the overtime pay by multiplying the overtime rate by the number of additional hours worked. The overtime compensation would be $30.56 ($6.11 x 5 = $30.56).

How do you Calculate Overtime with Multiple Pay Rates in Texas?

To calculate overtime with multiple pay rates in Texas:

  • Determine total earnings: Calculate the total earnings for each pay rate within the workweek. For example, if an employee worked 20 hours at $15 per hour (20 x 15 = $300) and 20 hours at $25 per hour (20 x 25 = $500), the total earnings of the employee would be $800 ($300 + $500).
  • Calculate the weighted average rate: To find the regular rate of pay for overtime calculations, compute the weighted average hourly rate. This is done by dividing the total earnings by the total hours worked. If the total earnings is $800 the weighted average rate would be $20 per hour ($800 / 40 = $20).
  • Compute the overtime rate: Multiply the weighted average by 1.5 to find the overtime rate. For the weighted average rate of $20, the overtime rate would be $30 per hour ($20 x 1.5).
  • Calculate overtime pay: Determine the number of overtime hours worked and multiply by the overtime rate. If an employee worked 5 hours of overtime, their overtime pay would be $150 (5 x $30 = 150).
  • Combine pay: Add the regular pay and the overtime pay to calculate the total pay for the week. Using the example above, the total pay would be $950 ($800 + $150).

Additional Considerations for Texas Overtime

Are there Exceptions to the Standard Overtime Rules in Texas?

The Fluctuating Workweek (FWW) Method is a specific approach to calculating overtime pay for salaried employees whose hours vary each week. Under this method, employees are paid a fixed salary regardless of the number of hours worked each week. If their hours fluctuate and they work over 40 hours in a week, they receive overtime pay at a rate of one-half (½) of their regular hourly rate. To qualify, employees must have a minimum hourly wage of $7.25 and a fluctuating workweek pattern. This method provides an exception to the standard overtime rules, allowing salaried employees who meet these criteria to earn overtime pay, unlike the typical rule where fixed-salary employees may be exempt from overtime.

In Texas, while many employees are exempt from overtime pay, the FWW method provides a way for certain salaried employees with fluctuating hours to receive overtime compensation. This is an exception to the general rule that salaried employees may not qualify for overtime under standard regulations.

Are there Industry-Specific Overtime Rules in Texas?

Yes, there are industry-specific overtime rules in Texas that differ from standard overtime regulations, which include:

  • Agricultural Workers: Agricultural workers in Texas are generally exempt from the FLSA’sbovertime requirements, meaning they do not receive overtime pay for hours worked beyond 40 in a workweek. This exemption covers workers involved in farming activities, such as growing and harvesting crops, and related processing. Employers in agriculture or agricultural commodity processing are included in this exemption. Special rules may apply to horticultural and dairy farm workers depending on their specific duties. Workers engaged in non-farming activities or employed by non-agricultural businesses may not be exempt from overtime provisions.
  • Transportation Workers: Under the FLSA, certain transportation workers, including drivers and mechanics, are exempt from standard overtime rules if they work for motor carriers or private carriers engaged in interstate or foreign commerce and perform safety-affecting duties.
  • Public Sector Employees: In Texas, state employees subject to the FLSA who work over 40 hours a week can receive either 1.5 hours of compensatory time for each overtime hour or overtime pay at 1.5 times their regular rate. Employees can accumulate up to 240 hours of compensatory time, or 480 hours for those in public safety or emergency roles.
  • Healthcare Workers: Healthcare employees have special considerations under the FLSA, they follow a 14-day work period for calculating overtime instead of the standard 7-day workweek. This can be advantageous for these industries, which often have varying schedules and extended shifts.

How can Employers Ensure Compliance with Texas Overtime Laws?

Employers in Texas can ensure compliance with Texas overtime laws by accurately classifying employees as exempt or non-exempt according to FLSA criteria. Exempt employees, including those in executive, administrative, or professional roles, are not entitled to overtime pay. Implementing reliable time and attendance tracking software is crucial for accurately recording all hours worked, this ensures precise tracking and correct calculation of overtime. In addition, maintaining comprehensive records of hours worked, wages paid, and overtime calculations is essential, as the FLSA mandates that these records must be kept for at least three years. Lastly, regularly reviewing and updating company policies helps ensure compliance with current federal and state labor laws, and staying informed about changes in regulations allows employers to adjust their policies accordingly.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.