Hourly Employee
What is an hourly employee and how does it differ from a salaried employee?
An hourly employee is paid based on the number of hours worked, typically with overtime pay at 1.5 times the regular rate for hours over 40 in a workweek under the FLSA. Hourly employees are usually non-exempt, meaning they are entitled to overtime pay and minimum wage protections. Salaried employees are paid a fixed amount per pay period and may be exempt or non-exempt depending on their duties and salary level. The classification drives pay structure, overtime eligibility, and timekeeping requirements.
The hourly employee is the baseline worker classification in U.S. wage-and-hour law. About 55% of U.S. workers are paid hourly, per BLS 2025 data, with the share concentrated in retail, hospitality, healthcare, manufacturing, and construction. Hourly classification drives three key compliance outcomes: overtime eligibility, minimum wage protection, and precise timekeeping rules. Employers that misclassify exempt salaried employees as hourly (or vice versa) create the most common wage-and-hour exposure in U.S. employment law, and the DOL recovers hundreds of millions of dollars per year in back wages from misclassification cases alone.
How Hourly Pay and Overtime Actually Work
Hourly employees are paid their regular rate for each hour worked and 1.5 times that rate for hours over 40 in a workweek. Some states (California, Colorado, Nevada, Alaska) add daily overtime for hours over 8 in a day. State minimum wage laws set the floor; federal minimum wage is $7.25 but most states are meaningfully higher.
Hourly vs. Salaried and the Exempt Classification Question
Being hourly usually means non-exempt from overtime. Being salaried can mean either exempt or non-exempt; the salary basis alone doesn't determine overtime eligibility. The FLSA exempt classification requires both a salary basis (minimum weekly salary, currently in transition under DOL rulemaking) and specific duties (executive, administrative, professional, outside sales, computer). See FLSA status for the duties test details.
Timekeeping and Record Requirements for Hourly Employees
The FLSA requires employers to keep accurate records of hours worked for non-exempt employees: daily and weekly hours, regular rate, overtime hours and pay, deductions, and total wages. Most modern payroll and time tracking systems handle this well. The common compliance issue is off-the-clock work: employees who respond to emails or take calls outside scheduled hours without recording the time. Even small amounts cumulate into back-wages exposure.
Running Hourly Employment Compliance Cleanly in 2026
The operational basics are classification accuracy, complete time records, state-specific overtime and minimum wage compliance, and clear onboarding communications about timekeeping expectations. Review classifications annually. Payroll audits against timekeeping data catch most problems before they become DOL audits. DOL FLSA overtime reference: dol.gov/agencies/whd/fact-sheets/23-flsa-overtime-pay.
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