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Texas overtime laws 2023: Navigating overtime pay in Texas

If you’re a business owner in Texas, it’s imperative that you have a good understanding of the overtime laws in your state. Failing to remain up to date with the current labor laws in Texas could mean costly penalties and litigation for you and your business.

In this guide, you’ll learn how overtime works in Texas so that you can prevent issues with the law and employees. Keep reading, or use the links below to jump to the sections that interest you.

What are the overtime laws in Texas?

In Texas, labor laws regarding overtime are outlined by the Fair Labor Standards Act, or FLSA. According to the FLSA, nonexempt employees must receive overtime compensation if they work more than a 40-hour workweek. The U.S. Department of Labor defines a workweek as 168 hours or seven consecutive 24-hour periods that can begin on any day and time.

The FLSA also requires employers to be paid time and one-half of their regular pay rate. For example, if your employee’s hourly wage is $13.50, and they worked one hour overtime, you’d pay them $20.25 for that hour. We’ll go over calculating overtime later in the post. You can pay your employees more than one and a half times their hourly rate if you choose.

All hours worked by employees, including time spent traveling and putting on equipment, should be properly accounted for. While you can track the hours your employees work manually, you should consider switching over to a time tracking system like QuickBooks Time. Not only can this prevent miscalculating hours, but it can also notify you when employees don’t clock out as scheduled and prevent unauthorized overtime.

Unlike a few other states, Texas hasn’t created additional overtime wage laws on top of the existing FLSA regulations.

Holiday and weekend pay

As a Texas employer, you’re not required to pay additional wages to your employees for working on holidays or the weekends. But if an employee’s workweek falls within these days, and they work more than 40 hours, they’re entitled to overtime pay.

Ultimately, whether or not you provide holiday pay for employees is left to your discretion. Many employers will often pay employees more than the minimum to incentivize them to work during the holidays or weekends.

Overtime and compensatory time

Compensatory time, also known as comp time, is paid time off given in lieu of overtime pay. Public employers in Texas are allowed to pay nonexempt employees comp time instead of overtime wages. However, private employers—employers that don’t work for a governmental agency—are not. If you’re a private employer and attempt to give an employee comp time instead of overtime, you’re breaking Texas overtime law.

A few examples of jobs that are eligible to receive compensatory time in the United States are:

  • Law enforcement officers
  • Park rangers
  • Firefighters
  • Paramedics

According to federal law, employees may not accumulate more than 240 hours of compensatory time. Once an employee reaches this cap, they must be paid overtime at one-half times their regular rate for overtime.

While some employees may love the idea of receiving paid time off instead of overtime compensation, it’s crucial that only eligible employees accumulate overtime credit. Make sure that qualifying employees receive comp time and those who are legally entitled to overtime pay receive what’s due.

Employees not entitled to overtime pay in Texas

Not all employees in Texas are eligible to receive overtime wages. Per the FLSA, employees are divided into either exempt or nonexempt. But what group do your employees fall under? Let’s take a look at the differences between exempt and nonexempt employees below, so you can categorize employees correctly.

Exempt employees will be paid a minimum salary of $35,568 annually or $684 per week and must meet one of the following criteria:

  • Executive: Executive employees will typically manage two or more full-time employees or a reasonable equivalent. This could be one full-time employee and two part-time employees. Employees in this category have the power to change the status of workers below them.
  • Administrative: These employees provide office assistance and nonmanual work that has a direct impact on the company they work for or its employees. This includes managing workplace policies and ensuring business operations are in order.
  • Professional: An employee is considered a professional worker when their job duties require extensive knowledge. Examples include certified teachers and artists.
  • Outside sales: Salespeople who primarily focus on making sales and tend to work outside of the workplace classify as an outside sales employee. Many of these individuals are also commission-based.
  • Computer related: Those hired as a computer systems analyst, computer programmer, or software engineer qualify for this employee exemption.

Salaried employees in Texas who perform the job duties mentioned above are expected to complete their projects and tasks regardless of the number of hours worked. So an employee could work more than 40 hours a week and won’t receive overtime compensation.

An exempt employee may be entitled to overtime wages if the employee:

  • Has a salary below the minimum threshold set by the FLSA
  • Is a manager or assistant manager, but has very few managerial duties
  • Receives tips

Double-check the regulation set forth by the FLSA when creating your overtime policy to ensure employees receive the correct amount of overtime pay.

Note that while employers are allowed to have mandatory overtime provisions, there are some exceptions. For example, hospitals in Texas are not allowed to extend nurses’ hours into overtime without their approval. Nurses can work overtime if they choose to, but they don’t have to.

Nonexempt employees in the state of Texas are not paid a salary. Instead, they’re hourly employees and receive at least the federal minimum wage. Nonexempt workers are also eligible for overtime pay, unlike exempt individuals.

In an effort to avoid paying overtime to employees, some employers incorrectly label their workers as exempt. However, that’s an employment law violation and could land you in hot water. It’s important that you classify all of your employees correctly to prevent issues with the federal government. Miscategorizing workers could lead to employees losing out on the overtime compensation they rightfully deserve, and they may take you to court.

How to calculate overtime wages in Texas

To calculate overtime pay in Texas manually, you’ll have to use the following formulas:

  • Hourly rate x 1.5 = overtime rate
  • Overtime hours worked x overtime rate = overtime pay
  • Hourly rate x 40 hours = regular pay
  • Regular pay + overtime pay = total pay for the week

Let’s take a look at the following example so that you can see the formulas above in action.

In this scenario, your employee’s regular rate is the federal minimum wage, which is $7.25, and they work two hours overtime:

$7.25 x 1.5 = $10.88

2 x $10.88 = $21.76

($7.25 x 40) + $21.76 = $311.76

So, your employee would receive $311.76 for working two excess hours in one workweek.

While the math above is pretty straightforward to follow, it can be challenging doing these calculations for many employees. Repetitive and manual counting can be time-consuming, and if your business is growing steadily, this will only get more difficult as time goes on.

Consider using a payroll service provider that’ll automatically calculate paychecks to ensure your employees receive an accurate amount every time. Use a payroll service to keep track of employee compensation and related payroll costs, and make it easier for payroll accountants to work through your documents.

Simplify overtime wages in Texas

If you’re a business owner, you understand how important following federal and Texas overtime laws are. However, correctly classifying employees and making the proper calculations won’t be enough if your employee’s clock-in and clock-out times are incorrectly reported. These types of errors can be devastating for your business and may lead to fines or even costly lawsuits.

Easily keep a record of your employees’ times with QuickBooks Time, an intuitive and efficient time tracking software. Made with businesses like yours in mind, QuickBooks Time is an all-in-one time tracking solution that can accurately record the total hours worked by employees. Plus, it can help you reduce payroll issues for overtime compensation with the QuickBooks Time Pay Rate Engine. Fewer payroll errors could mean a more productive and happier team and more money in your pocket since less time is spent correcting mistakes.

With the Pay Rate Engine, you can easily automate overtime calculations, ensuring all overtime is properly accounted for. Get started with QuickBooks Time today and see how you can save time, reduce payroll errors, and help your business follow overtime laws.

Is your business located in another state besides Texas? Take a look at our guide on overtime pay laws by state if you need assistance.


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