Short answer

Salary and hourly pay describe how compensation is calculated, not whether an employee is exempt from overtime. Salary uses a set amount for a work period; hourly pay uses a rate per hour. Under the US federal FLSA arrangements described by the Department of Labor, nonexempt employees can receive a salary and still be owed additional overtime. 1 2

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At a glance

QuestionSalary payHourly pay
Starting point for pay?Set amount for a work periodRate per hour worked
Can additional overtime be owed?Yes, for nonexempt employeesYes, for nonexempt employees
Does the label establish exemption?NoNot an exemption test
Is an hourly calculation relevant?Yes, to determine the regular rateYes, though other included earnings can affect it

These distinctions follow the federal compensation methods discussed in the supplied fact sheets. 1 2

What each thing is

Hourly pay starts with hours and a rate. Salary pay starts with an agreed amount, but what that amount covers matters: a specified workweek and a fluctuating workweek covering all hours are different arrangements. The word “salary” does not resolve that difference. 1 2

Key differences

The central difference is the starting calculation, not necessarily the final paycheck. Under the fluctuating workweek method, the salary stays fixed while the hourly regular rate changes with hours worked. An hourly arrangement instead starts from the stated hourly rate, with overtime and other compensation considered separately. 2

How to tell them apart

Ask whether straight-time compensation begins with a set period amount or an hourly rate multiplied by hours. Then separately ask what hours a salary covers and how overtime is calculated. This identifies the pay arrangement; it does not establish exemption, because the sources explicitly describe salaried nonexempt employees. 2

Where they overlap

Both methods can involve an hourly regular rate for federal overtime calculations. Included earnings are divided by hours actually worked; certain statutory exclusions are left out. Consequently, receiving a bonus or commission can matter to overtime calculations even when the employee’s base compensation is a salary. 1 2

Edge cases

A salary covering all fluctuating hours is not interchangeable with one covering a fixed number of hours. The fluctuating workweek method requires hours to vary week to week and cannot be used when the salary is understood to cover a specific fixed number of weekly hours. A salary label alone cannot distinguish these cases. 2

Why the distinction exists

Pay method describes the compensation arrangement; overtime rules address additional compensation owed. Keeping those questions separate explains why a fixed salary for a workweek exceeding 40 hours does not, by itself, discharge federal overtime obligations. 1

Common misconceptions

“Salaried” does not mean “no overtime,” and an hourly regular-rate calculation does not turn a salaried worker into an hourly-paid worker. Likewise, additional half-time under the qualifying fluctuating workweek method is not a general shortcut for every salary arrangement. 1 2

Examples

Two source examples show the distinction. A $405 straight-time salary covering 45 hours yields a $9 regular rate and $22.50 additional overtime. Separately, a qualifying fluctuating-workweek employee with a $600 salary, $100 bonus, and 45 hours receives $38.90 additional overtime using the source’s rounded calculation. Both employees receive salaries; neither salary eliminates overtime. 1 2

Sources

  1. U.S. Department of Labor, Wage and Hour Division: Fact Sheet #23: Overtime Pay Requirements of the Fair Labor Standards Act
  2. U.S. Department of Labor, Wage and Hour Division: Fact Sheet #82: Fluctuating Workweek Method of Computing Overtime

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