From the BlogSubscribe Now

Wage Theft – Should Salaried Workers Get Paid Overtime?

Salaried positions are tricky. On the one hand they mean you are going to get paid and are unlikely to have your hours and therefore income cut, but what about overtime? Not all jobs pay overtime, if you are on a salary. Is it wage theft? This is something to think about when you are looking for a new job.

“Wage theft” is just the new fancy term for an issue that has long been apparent, the overworked and underpaid salaried workforce here in the U.S. More specifically, it refers to all of the lost wages a salaried worker incurs due to working a TON of overtime, yet being paid based on a 40 hour work week. The media has chosen to focus on the need for minimum wage increases but very little attention has been paid to the effective hourly rate of a salary worker. Let’s say for example that a worker earns $40,000 a year, but they are not eligible for overtime pay, that comes out to $20 an hour. How you may ask? Well let’s assume that the average employee works 40 hours per week, and 50 weeks per year (2 weeks of vacation), simply multiple the two and you have 2,000 hours worked. Then you divide the $40,000 salary by the 2,000 hours worked, and voila, you have $20 per hour. Not too shabby when you consider the average minimum wage worker earns well below $10 an hour. BUT…let’s consider for a moment that the salary worker actually puts in about 60 hours each week….that would change the effective hourly rate to $13.33. Maybe the worker puts in even more hours than that, or they are unable to take their 2 weeks of “paid” vacation time. It wouldn’t be difficult for a salary employee to wind up with less than a minimum wage rate per hour.

I am a salaried employee myself, and while I make a good salary for my position I also put in a ton of hours each week. In fact, last week I worked all 7 days, and spent 12 to 14 hours each day at work. Let’s say I put in roughly 80 hours last week. Whatever my hourly rate would work out to on a normal 40 hour week is essentially cut in half considering I worked 40 total hours above and beyond the so called normal work week. I’m in corporate finance, so I understand this comes with the territory, but it still doesn’t make it any easier to swallow. Many hourly workers forget the struggle that the salaried employee has to deal with at times. Too often we are looked at as the privileged white collar worker, but everything comes with a price. While I’m certain that my effective hourly rate is still well above minimum wage, it is somewhat disheartening to know that there are several non-degreed professions that will make more per hour despite me having an MBA in Finance, simply because I work so many more hours than all of them.

I actually have a couple of engineer friends who are relatively high up in their respective careers, yet they still earn overtime despite being paid a flat salary. Any hours worked above and beyond 40 each week is paid out at time and half in their bi-weekly checks. They also have an option to accrue additional vacation time instead of cash. Not bad, right? They make pretty decent salaries too. In fact, my one friend is leery of becoming a manager because he will then become an exempt employee….which means exempt from overtime pay. What could equate to a $10,000 annual raise would probably take away $15,000 in overtime income he earns now, and his total hours worked will probably go up even more.

There have been a lot of recent talks about mandating overtime pay for salaried workers. Partly because many companies are taking positions that have historically required 60+ hours each week and turning them into salaried positions. This way they can mask the fact that many of their workers are earning less than an effective minimum wage rate. In fact, there have been several class action lawsuits to date that have tackled this very issue. But this issue extends above and beyond that. The American workers health and well-being has long suffered due to work weeks that becoming seemingly longer and more stressful each year. There are several benefits to providing salary employees with overtime, some benefit the employer, some the employee, and others the economy!

I’ve always said that a happy and fulfilled employee will bring prosperity to the employer. This is the benefit a company receives when it treats their employees right. They will experience higher worker productivity, and lower turnover rates. Too often companies don’t consider the cost of employee turnover each year. There is a cost to hiring and training a worker, and then a cost that goes along with terminating that employee, it’s best to just get it right the first time around. Lastly, hours worked plays into poor health, which in turn can cause expensive medical plans that become unsustainable for a company.

For the employee themselves, being paid fairly is usually the first criteria for choosing where to work.  If you are able to accrue extra vacation time, or stash a few extra dollars away in your retirement account, then working additional hours at least provides you with a silver lining. Meaning, it provides you a way of working less hours down the road.

Make no mistake, the economy would benefit to some reform in this area. TOO OFTEN employers are skating by on having works put in crazy amounts of overtime. If they were forced to pay their salaried employees time-and-a-half they would have to rethink their entire workforce. Either the amount of “unnecessary projects” are prioritized a bit better, or they hire MORE people rather than forcing their current employees to just work more. On one hand they pay overtime and pump more money into the economy through overtime wages, or the other they hire more people and continue a steady decline in the unemployment rate we have been enjoying as of late.  To me this is a no-brainer, and it’s not just because I’m a corporate finance guy who has the effective hourly rate of a fry cook.

What do you think?


  1. My Mom has been salary for years and I asked her this question before and she told me no it doesn’t bother her that some weeks she works over 40 hours. Now she gets 6 weeks of paid vacation plus 10 sick days since she has worked there so long but on the other hand she hasn’t got a cost of living raise in about 5 years. She said the way she balances it out is when she has to work over time or has to take care an on call issue when she has the work pager she tries to get back her time other ways like leaving work early when they aren’t as busy or taking a longer lunch when she doesn’t have appointments in the afternoon. Even with doing that she said she still probably averages over 40 hours a week through out the year. Her employer is perfectly OK with her and everyone else in the office doing this. Some may not be but it might be worth the time to find out.

  2. I think that when u have a company as flexible as your moms, then it is more akin to “flexible work hours” rather than too many hours worked. If I work 60 hours in a week there is no way I’m getting those 20 hours back…. I would say that by the end of the year I have worked 100’s of hours above and beyond the typical 2,000 hour work year.

    I envy your mom’s ability to get the time in in other ways, but in my opinion that is definitely how it should be.

  3. I agree – the overtime I work makes me livid sometimes. Especially because my boss swore he would track it and give it to us during slower weeks as time off, but in reality, he doesn’t pay any attention to our overtime and makes you feel like a total jerk if you mention it later, like you’re not a team player. It’s very frustrating.

  4. I used this to figure out what my salary comes out to an hour, and I was shocked that it came to $7.50/hour when I work well over 40 hours every week. My salary is $300 weekly before taxes. It’s pretty insulting that I get paid what a cashier is paid when I’m expected to produce 10 articles or more a week as a staff writer. I’m not even paid for the stories and foot work I’m assigned to on the weekends and after work in the evenings. He just pays me for the time spent in the office. This is insulting. I’m glad I was able to figure this out.

  5. I was told I am expected to work about 50 hours per week on my salary… after I had been at the job for 2 months and had been hired for 8-4:30. I was told I was NEVER to be off at 4:30. I am now putting in 60-72 hours consistently. I’m “allowed” to leave for an appointment, but if I do, I’m expected to stay late. I’m also not allowed to complain about it- after all, there are lots of people who would love to work where I work. I moved 1500 miles for this job. I am SO angry…

Join the Discussion!