What is an hourly employee?

An hourly employee is paid a set rate for each hour worked. Most hourly employees are non-exempt under the FLSA, which means they must get at least the minimum wage for every hour and overtime at one and a half times their regular rate after 40 hours in a workweek.

In shortAn hourly employee is paid by the hour rather than a fixed salary. Pay for a period is the hourly rate multiplied by hours worked, plus any premiums. Nearly all hourly employees are non-exempt, because most FLSA exemptions require payment on a salary basis. That brings three core rules. They must be paid at least the federal minimum wage of $7.25 an hour, or the higher state or local minimum where they work. They must be paid overtime at one and a half times the regular rate for hours over 40 in a workweek, and the regular rate includes most bonuses and differentials, not just the base rate. And the employer must keep records of their hours worked each day and each workweek. What counts as hours worked is broader than the time on the schedule: work the employer suffers or permits, short rest breaks, and meal breaks where the employee is not completely relieved all count. Some states add daily overtime, required breaks, reporting time pay or predictive scheduling. Hourly is about how someone is paid, not about hours or status, so an hourly employee can be full-time, part-time, seasonal or temporary.

Hourly vs salaried

Two ways to pay
Hourly Salaried
Pay Rate x hours worked Fixed amount per period
FLSA status Almost always non-exempt Exempt if salary level, salary basis and duties tests are met, otherwise non-exempt
Overtime After 40 hours in a workweek Only if non-exempt
Time records Required Hours required only for non-exempt

See non-exempt employee and salaried non-exempt for the other pay types.

One 45-hour week with a $45 bonus45 x $17= $765+ bonus= $810/ 45= $18 rate+ 5 x $9= $855The bonus raises the regular rate
A nondiscretionary bonus goes into the regular rate before overtime is calculated.

Worked example: a week with a bonus and a short break

$17 an hour, 45 hours, a $45 bonus

A warehouse picker earns $17 an hour. One week he works 45 hours and earns a $45 productivity bonus. On one shift, his 30-minute meal break was cut to 15 minutes by a truck arrival, and the system recorded it, so those 15 minutes are hours worked and are already in the 45.

Straight-time pay is 45 x $17 = $765, plus the $45 bonus, for $810. Because the bonus is nondiscretionary, it is part of the regular rate: $810 / 45 = $18 an hour.

The 5 overtime hours earn an extra half of $18, which is 5 x $9 = $45. Total pay for the week is $855. Paying overtime at 1.5 x $17 without the bonus would have given $807.50 plus the $45 bonus, $852.50, an underpayment of $2.50 that adds up across many weeks and employees.

Mistakes that are specific to hourly employees

Paying hourly employees accurately

Most pay problems for hourly employees come from small gaps in the time record. Make clocking in and out easy at every location, review missing punches before payroll, record corrections with a reason, and check that breaks were taken as scheduled. Approve time cards before the cutoff, so corrections are paid on time rather than on the next check.

Explain pay clearly too. A new hourly employee should know their rate, their workweek, how overtime and differentials work, how to fix a missed punch and when payday is. Those five points answer most of the questions payroll gets in an employee’s first month.

Second example: a missed punch in a 40-hour week

A retail associate at $16.50 forgets to clock out on Thursday. Her recorded hours show 32, though she worked her full 8-hour shift and 40 hours in the week.

She submits a missed-punch request before payroll closes, the manager confirms with the closing log, and she is paid for 40 hours, $660, on time. Without the request, she would have been short $132 until the next check.

Check one paycheck by hand each quarterPick an hourly employee with a bonus or differential and an overtime week, and recalculate the pay by hand. It is the quickest way to find a regular rate setting that payroll software got wrong.

Questions people ask

What is an hourly employee?

An employee paid a set rate for each hour worked, usually non-exempt and entitled to overtime.

Do hourly employees get overtime?

Almost always. Non-exempt employees get one and a half times their regular rate for hours over 40 in a workweek.

Can an hourly employee be full-time?

Yes. Hourly describes how someone is paid, not how many hours they work.

What is the federal minimum wage for hourly employees?

$7.25 an hour, though many states and cities set higher minimums.

Do hourly employees get paid for training?

Generally yes, when training is required or related to the job. Time spent in required training counts as hours worked.

How should hourly employees fix a missed punch?

Submit a correction request with the actual time, which the manager approves after checking. The record keeps both the original and the change.

Related on EZTime

Useful next steps

Keep HR paperwork and updates in one place

Digital HR forms, e-signatures and a digital employee file with expiry reminders, plus announcements by location, department or role.

Disclaimer: What you read here about hourly employee is general information, not legal, payroll or tax advice, so confirm the current rule where you operate; the examples are fictional.