Hourly Compensation Requirement: A Practical Compliance Guide for Employers (SwiftSDS)

If you’re searching for the hourly compensation requirement, you’re likely trying to confirm that your pay practices meet federal wage-and-hour rules—especially minimum wage, overtime, and the conditions under which a “salary” must still translate into a lawful hourly rate. This SwiftSDS guide explains the minimum hourly compensation requirement, how it interacts with “salary” pay, and what HR teams and business owners should document to stay compliant.

For broader context on wage-and-hour obligations, see SwiftSDS’s hub on employment basics.

What “hourly compensation requirement” means under federal law

At the federal level, the hourly compensation requirement is primarily governed by the Fair Labor Standards Act (FLSA) (29 U.S.C. § 201 et seq.) and related regulations in 29 C.F.R. Part 531 (wages), Part 541 (exemptions), and recordkeeping rules in 29 C.F.R. Part 516.

In practice, it means:

Nonexempt employees must be paid at least the federal minimum wage for every hour worked (currently $7.25/hour, unless a higher state/local wage applies).
Nonexempt employees must receive overtime pay of at least 1.5× the regular rate for hours worked over 40 in a workweek.
Employers must calculate the regular rate correctly (including certain nondiscretionary bonuses and differentials), not just the stated “hourly wage.”

To help with posting and notice compliance, many employers keep the DOL’s FLSA notice accessible to employees, such as Employee Rights Under the Fair Labor Standards Act (and the Spanish version, Derechos… Bajo la Ley de Normas Justas de Trabajo (FLSA)).

Minimum hourly compensation requirement: the federal baseline

Federal minimum wage requirement (FLSA)

Under the FLSA, covered, nonexempt employees must be paid at least $7.25 per hour. If state or local law requires more, employers generally must pay the higher applicable rate.

For a quick compliance reference related to notices, SwiftSDS provides a resource on the Federal minimum wage poster, including how to meet posting expectations.

Overtime requirement: the “regular rate” is the key

Overtime isn’t based only on an employee’s stated hourly wage—it's based on their regular rate (29 C.F.R. § 778). The regular rate typically includes:

hourly wages or salary (converted to an hourly equivalent)
nondiscretionary bonuses
shift differentials
some commissions

Actionable step: Audit pay codes in your payroll system to ensure nondiscretionary bonuses are included in the regular rate calculation for nonexempt employees.

Salary pay and the “minimum expected rate salary” problem

Many employers ask about a minimum expected rate salary—meaning: “If I pay a salary, what hourly rate does that represent, and will it still meet minimum wage and overtime rules?”

Salaried nonexempt employees still have an hourly floor

It’s legal to pay a nonexempt employee on a salary basis in some situations, but you must still ensure:

the salary covers at least minimum wage for all hours worked in the workweek; and
the employee receives additional overtime pay for hours over 40, unless a lawful alternative method applies.

Practical example:
If a salaried nonexempt employee earns $800/week and works 50 hours, you must confirm the regular rate and overtime premium are paid correctly. If the salary is intended to cover only 40 hours, overtime is typically owed on top. Even if it covers more hours, special calculations may apply—missteps here are a common audit issue.

Actionable step: Require managers to approve and track actual hours worked for salaried nonexempt roles; do not assume “salary” means “no timekeeping.”

Salaried exempt employees: minimum salary thresholds and duties tests

If you classify an employee as exempt from overtime (executive, administrative, professional, etc.), you must satisfy:

Salary basis test (paid on a salary basis with limited deductions), and
Salary level test (minimum salary threshold), and
Duties test (job duties meet exemption criteria)
—under 29 C.F.R. Part 541.

Actionable step: Maintain written job descriptions and periodically compare actual duties to exemption criteria. Misclassification risk rises when roles evolve.

Common compliance traps that violate hourly compensation requirements

H3: Off-the-clock work (including “small tasks”)

Under the FLSA, compensable time includes time the employer “suffers or permits” work to be performed. Common pitfalls:

answering emails/texts after hours
booting up systems before clock-in
closing tasks after clock-out

Actionable step: Implement a clear timekeeping policy and train supervisors to stop “helpful” off-the-clock practices. Tie this into broader worker rights education such as SwiftSDS’s overview of the 5 rights of workers.

H3: Improper deductions that reduce pay below minimum wage

Certain deductions (uniforms, tools, shortages, damages) can’t reduce pay below minimum wage or cut into overtime pay due.

Actionable step: Review deduction policies with payroll and HR; confirm deductions comply with federal rules and any stricter state requirements.

H3: Failing to pay for all hours worked (travel, training, waiting time)

Time can be compensable depending on circumstances (29 C.F.R. Part 785). Training and travel rules are especially fact-specific.

Actionable step: Create a checklist for compensable time categories and require HR review for new scheduling, travel, or training programs.

Location-specific rules: minimum wage and posting requirements vary

Federal law is the baseline; many states and cities set higher minimum wages and impose additional posting requirements.

For multi-state employers, start with SwiftSDS’s Federal (United States) Posting Requirements and then confirm state/local obligations.
If you operate in California, review California (CA) Posting Requirements and SwiftSDS’s deeper dive on California wage law.
For local requirements layered on top of California rules, see San Francisco County, CA Posting Requirements.
If you employ workers in the Midwest and need a state example with federal interplay, SwiftSDS covers Federal minimum wage Illinois.
For work schedules and hour limits that affect wage calculations and overtime exposure, use SwiftSDS’s reference on employment working hours law.

Actionable step: Maintain a location matrix (state/city/county) listing the applicable minimum wage, overtime nuances, and posting obligations; update it at least annually and whenever you open a new location.

Recordkeeping: your best defense in a wage-and-hour complaint

FLSA recordkeeping rules (29 C.F.R. Part 516) require employers to keep accurate payroll records, including hours worked for nonexempt employees.

Minimum best practices:

time records showing start/stop times and meal breaks (where applicable)
pay rate(s), total straight-time, overtime, additions/deductions
payroll reports and source documents (schedules, edits, approvals)

Actionable step: Lock down timecard edit permissions and require documented reasons for edits. Inconsistent edits are a common enforcement red flag.

Posting and notice compliance: don’t forget the required workplace notices

Federal posting requirements typically include a version of the FLSA minimum wage notice. Depending on your workforce and industry, different versions may apply, such as:

Actionable step: Confirm the poster version matches your employer type (private, state/local government, agriculture) and that it’s accessible for remote workers as required by your policy and applicable guidance.

FAQ: Hourly compensation requirement

1) What is the minimum hourly compensation requirement under federal law?

For covered, nonexempt employees, the FLSA generally requires at least $7.25/hour plus overtime at 1.5× the regular rate for hours over 40 in a workweek. If state/local law requires more, you must usually pay the higher rate.

2) If I pay an employee a salary, do I still need to track hours and comply with minimum wage?

If the employee is nonexempt, yes—salary does not remove minimum wage and overtime obligations. For exempt employees, time tracking may not be required by the FLSA, but you must meet exemption tests (salary basis, salary level, duties).

3) Which poster covers minimum wage and overtime rights?

The U.S. Department of Labor’s FLSA notice, Employee Rights Under the Fair Labor Standards Act, is the primary federal posting. Some employers need a specialized version (state/local government or agriculture), and many states/cities require additional wage notices.

Compliance checklist (quick takeaways)

Pay at least the applicable minimum wage (federal vs. higher state/local).
Calculate overtime using the correct regular rate.
Treat “salary” carefully—confirm whether the role is exempt and why.
Track and pay for all hours worked (including remote/off-the-clock work).
Maintain required records and required wage-and-hour postings for each location.

For additional federal compliance context beyond wages—especially where pay practices intersect with broader workplace rights—see SwiftSDS’s coverage of as it pertains to employment opportunity the eeo strives to.