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What is the FLSA overtime salary threshold — and how to calculate OT if you're near it

Updated May 1, 2026  ·  7 min read

The FLSA overtime salary threshold is a single number that determines whether a salaried employee must be paid overtime or is exempt from it. Get it wrong and you either overpay exempt managers or underpay workers who are legally owed time-and-a-half. After two years of whiplash — a Biden administration raise, a court block, and a likely rollback under the Trump DOL — the number small employers should use in 2026 is genuinely in flux. This article explains what the threshold is, where it stands right now, and how to calculate overtime for any employee sitting near the line.

What the FLSA overtime salary threshold actually means

The Fair Labor Standards Act (FLSA) requires employers to pay non-exempt employees overtime — at least 1.5 times the regular rate — for all hours worked beyond 40 in a workweek (29 CFR §778.107). But the law also carves out exemptions for certain categories of workers: executives, administrators, professionals, outside salespeople, and computer employees. These are the so-called "white-collar" exemptions.

To qualify for any of these white-collar exemptions, a salaried employee must pass a three-part test:

1. Salary basis: The employee must be paid a predetermined, fixed salary that doesn't vary based on hours worked or quality of output.
2. Salary level: That salary must meet or exceed the federal threshold — the number that keeps changing.
3. Duties test: The employee's actual job duties must match the criteria for the relevant exemption category (executive, administrative, or professional).

All three parts must be satisfied. An employee who earns $100,000/year but whose job duties don't meet the executive criteria is still non-exempt. And an employee who genuinely manages a team but earns below the salary threshold is also non-exempt — the duties test alone isn't enough.

The salary threshold is the number most employers focus on because it's the most likely to trip them up. It changes by regulation (not by statute), which is why it has been revised multiple times in the last decade.

The 2024 Biden rule, the 2025 court block, and where things stand in 2026

Here is a timeline of the key threshold changes every small employer needs to know:

In November 2024, a federal district court in Texas vacated the Biden DOL's two-phase salary threshold increases, ruling the Department of Labor had exceeded its authority. The court's decision applied nationwide. The Biden phase 1 ($844/week effective July 2024) and phase 2 ($1,128/week set for January 2025) were both struck down.

As of mid-2025, the Trump administration's DOL had signaled it would not appeal the Texas ruling and was expected to issue a new rule restoring the threshold to the 2020 level of $684/week ($35,568/year) — or potentially set a new figure through rulemaking. No final rule had been published as of this writing.

Who is exempt vs. non-exempt — the three-part test in practice

Let's make the three-part test concrete with two examples:

Note: purely hourly employees don't go through this test at all. If you pay someone an hourly rate, they are non-exempt by default. The salary threshold only matters when you're deciding whether to classify a salaried employee as exempt.

How to calculate overtime pay for employees near the threshold

When a salaried employee is non-exempt — either because their salary falls below the threshold or because they fail the duties test — you owe them overtime for any workweek in which they exceed 40 hours. Here is how to calculate it.

For a non-exempt salaried employee, the regular rate of pay is their weekly salary divided by the hours they are expected to work each week. The DOL's most common interpretation: if the salary covers a fixed number of hours (say 40), the regular rate is salary ÷ 40.

Notice that the salary already covers the straight-time component for all 47 hours worked (the "fluctuating workweek" method). What the employer additionally owes is the half-time premium on the OT hours — not a full 1.5x on top of the salary. This is the correct calculation under the FLSA's "salary covers all hours" model. (There is also a fixed-hours salary method where the employer owes a full 1.5x on OT hours — the right method depends on the employment agreement. Verify with your accountant.)

If James were paid hourly at the equivalent rate of $16.25/hour, the math would look like this instead:

The difference — $820.63 hourly vs. $706.88 salary method — is why classification and the employment agreement both matter. The higher obligation applies to hourly non-exempt workers. Use PayrollTimeCalc's free calculator to run either scenario from actual clock-in/clock-out times.

What a threshold rollback means for your payroll math

If the federal threshold drops back to $684/week, employers who proactively raised salaries to comply with the Biden $844 or $1,128 thresholds face a practical question: do you lower those salaries back? Most employment attorneys advise against salary reductions if avoidable — they damage morale and can trigger constructive dismissal claims. The smarter move for most small employers is to leave salaries where they are and treat the exemption question as settled.

The bigger operational impact is for employees who were reclassified as non-exempt because their salary fell between $684 and $1,128. If the threshold rolls back and their salary is above the new level, you may be able to reclassify them back to exempt — but only if they also satisfy the duties test. The salary threshold is a necessary condition, not a sufficient one.

From a payroll mechanics standpoint, here is what changes when an employee switches from exempt to non-exempt (or vice versa):

• Non-exempt: You must record actual hours worked each day. Overtime is owed for every hour over 40 in a workweek — no exceptions for salary level. You need a time-tracking system.
• Exempt: No hour tracking required under the FLSA (though some states differ). Salary is paid regardless of hours worked. No OT obligation from federal law.

If you manage hourly staff who have never had an exemption question, the salary threshold doesn't change anything for you. Hourly workers are non-exempt; you owe OT when they cross 40 hours. That rule hasn't changed and isn't affected by the Biden/Trump DOL rulings.

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