Overtime Pay Compliance Small Business Checklist
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- Overtime Exemptions FLSA 2026 Eligibility Checker — Overtime Exemptions FLSA 2026 Eligibility Checker
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- Time and a Half Calculator: Free Overtime Pay (No Signup) — Time and a Half Calculator: Free Overtime Pay (No Signup)
The Core Compliance Formula
Overtime compliance is a two-part test: coverage (does FLSA apply to this business?) and calculation (is the pay right when it does?).
Formula = Enterprise coverage ($500K gross sales OR interstate commerce) + Non-exempt worker + Hours over 40 in workweek × 1.5 × regular rate
Miss either side of the test and you’re exposed — either paying overtime you don’t owe, or skipping overtime you do.
Step By Step: The Small Business Compliance Checklist
Run through these in order. Most small business owners trip on items 3, 5, and 7.
- Confirm enterprise coverage. Annual gross sales at or above $500,000, or any employee engaged in interstate commerce? FLSA applies.
- Identify every worker as exempt or non-exempt. Don’t assume salaried = exempt.
- For each exempt worker, verify the salary threshold: at least $684/week ($35,568/year) AND a duties test (executive, administrative, professional, etc.). Both must pass.
- For highly compensated employees, verify salary at or above $107,432/year plus at least one exempt duty.
- Track all hours for non-exempt workers — including pre-shift prep, off-the-clock email, and travel between job sites.
- Define the workweek (any fixed 168-hour period). It does not have to match the calendar week, but it must be consistent.
- Calculate the regular rate per workweek, including non-discretionary bonuses and shift differentials, then pay 1.5× that rate for hours over 40.
2026 Real Case: A Coffee Roaster’s Threshold Surprise
A friend who owns a small-batch coffee roaster in Oregon reclassified her office manager as exempt in 2024, when the rule raised the threshold toward $1,128/week. She set the salary at $52,000/year to clear that bar. When the threshold was restored to $35,568 in May 2026, she kept the higher salary — no problem there — but realized she’d never actually run the duties test. Her manager spent 60% of her time on customer-facing counter work, which doesn’t qualify as executive or administrative under FLSA. She had a properly paid but misclassified worker. Reclassifying to non-exempt and paying overtime for the over-40 weeks cost roughly $4,800 in back pay. The threshold passed; the duties test didn’t.
The 2026 Threshold Reference
Here’s what the restored FLSA exemption numbers look like, side by side with the vacated 2024 rule.
| Exemption type | Restored 2026 threshold | 2024 rule (vacated) |
|---|---|---|
| Standard salary | $684/week ($35,568/yr) | $844 → $1,128/week |
| Highly compensated employee | $107,432/yr | $132,964/yr |
| Hourly rate basis (computer employees) | $27.63/hr | $27.63/hr (unchanged) |
The May 15, 2026 restoration means small businesses that raised salaries in 2024 to clear the higher bar are now above the new floor — which is fine for compliance, but they should still verify the duties test, since salary alone never made a worker exempt.
Common Small Business Violations
The Department of Labor’s most common findings against small employers cluster in a few predictable places.
| Violation | What it looks like | Fix |
|---|---|---|
| Off-the-clock work | Pre-shift setup, post-shift cleanup unpaid | Pay for all hours worked, including prep |
| Wrong regular rate | Overtime on base rate only, ignoring bonuses | Recompute regular rate weekly with bonuses |
| Misclassified exempt | Salaried worker doing non-exempt duties | Apply the duties test, not just the salary |
| Comp time in lieu of OT | Private employer offering time off instead of pay | Pay cash overtime; reserve comp time for public sector |
| Bad time records | Rounded times, no actual log | Keep accurate records for 2+ years |
So where do people mess this up? Treating “salaried” as a synonym for “exempt.” It isn’t. A salaried non-exempt worker is still owed overtime, and a lot of small employers don’t realize that until a complaint lands.
Tools For Running The Checklist
The FLSA overtime eligibility checker walks a single worker through the salary and duties tests to flag exemption status. Once a worker is confirmed non-exempt, the overtime pay calculator computes the weekly overtime owed at 1.5× the regular rate. For quick single-rate calculations, the time-and-a-half calculator handles the 1.5× multiplier on a known hourly rate.
For broader context, our how does FLSA overtime work walkthrough explains the regular-rate math, and our overtime exempt vs non-exempt guide breaks down the duties tests in detail.
Frequently Asked Questions
What is the 2026 FLSA salary threshold for white-collar exemption?
As of May 15, 2026, the restored standard salary threshold is $684 per week, or $35,568 per year. The highly compensated employee threshold is $107,432 per year. The 2024 rule that raised the threshold to $844 and then $1,128 per week was vacated in November 2024 and formally rescinded in May 2026.
Does the FLSA apply to very small businesses?
Yes, if the business has at least two employees and annual gross sales of $500,000 or more, or if individual employees are engaged in interstate commerce. Most small businesses meet the coverage test even with only a handful of workers.
Is overtime 1.5× the regular rate or the base hourly rate?
It is 1.5× the regular rate, which includes most non-discretionary bonuses, shift differentials, and commissions. Calculating overtime on only the base hourly rate is one of the most common FLSA violations small businesses make.
Can a small business offer comp time instead of overtime?
Private-sector employers generally cannot offer comp time in lieu of overtime pay to non-exempt workers. Comp time instead of cash is largely limited to public-sector employers under the FLSA.
The Bottom Line
Small business overtime compliance in 2026 comes down to the restored $684/week threshold, an honest duties test, accurate hours tracking, and overtime calculated on the full regular rate — not just the base. Run each worker through the FLSA overtime eligibility checker first, then verify the math with the overtime pay calculator. A 30-minute audit now beats a DOL back-pay claim later.