Pennsylvania employers need to fully understand the requirements regarding Pennsylvania overtime laws and take action in order to avoid legal and financial penalties.
Under Pennsylvania Labor Law, employers must adhere to regulations regarding overtime under the Fair Labor Standards Act (FLSA) and Pennsylvania Minimum Wage.
While some occupations are exempt from overtime requirements under the FLSA, Pennsylvania Minimum Wage legislation may require otherwise.
Businesses that are struggling with managing overtime and budgeting labor may want to learn more about what is employee scheduling, and the value of employee scheduling software.
According to Pennsylvania Overtime Law, employees in Pennsylvania covered under the state or federal overtime requirements are typically entitled to 1.5 times the regular rate of pay for all hours worked over 40 in a work week.
PA Overtime Calculation Example:
40 Regular Rate Hours
X $15 Per Hour Regular Rate
=$600
$15 Per Hour Regular rate
+ 1 ½ Overtime Premium
=$22.50 Per Hour Overtime Rate
10 Overtime hours
X $22.50
=$225
$600 Regular Rate Time or "Straight Time"
+ 225 Overtime
=$825 Total Pay
An employee’s regular rate of pay is the normal hourly wage. If an employee’s rate of pay differs at times, then use the average as the regular rate of pay.
Payments that are not part of an employee’s regular rate of pay include the following types of payments:
Pennsylvania legislation provides a full list of pay types that do not count as “regular rate” for employees here.
Signed by President Trump on July 4, 2025, the One Big Beautiful Bill Act allows eligible employees to claim a tax deduction on overtime pay required by the FLSA from taxable income. The overtime tax deduction is effective from January 1, 2025 through December 31, 2028.
An employee can deduct an annual maximum amount of $12,500. For employees jointly filing with a spouse, the annual deduction amount is capped at $25,000. If an employee’s modified adjusted gross income (MAGI) exceeds $150,000 ($300,000 for employees filing jointly), the amount allowed to be deducted will be reduced by $100 for each $1,000 earned above the MAGI.
To be eligible for the overtime tax deduction, employees must include a Social Security number on the tax return for the given tax year. If married, the employee must also file jointly to remain eligible. Even if individuals opt for a standard deduction (vs. itemized deductions) on a tax return, the individual is still eligible for the annual maximum deduction for overtime.
All employers must file information returns to the IRS or Social Security Administration (SSA), as well as deliver the applicable forms, including a W-2, to employees that show the total amount of qualified overtime compensation paid out during the tax year.
Generally, all employees in Pennsylvania are eligible to receive overtime pay unless an employee meets specific criteria classifying him or her as exempt from overtime pay.
First, in order to receive overtime an employee must pass the salary level test. However, passing this test alone does not classify an employee as exempt. Only those employees that pass the salary level test and meet the criteria below of either an executive, administrative, or professional employee are exempt from overtime.
On November 15, 2024, the U.S. District Court for the Eastern District of Texas invalidated a U.S. Department of Labor (DOL) regulation that raised the salary threshold for the "white-collar" overtime exemption under the Fair Labor Standards Act (FLSA). This decision applies nationwide, rendering the rule ineffective.
As a result of the court ruling, the overtime-exempt salary threshold for the foreseeable future is $684 per week ($35,568 annually). This threshold reflects the most recent update that is still in effect, made in 2019.
For highly compensated employees, the threshold remains at $107,432 / year (including at least $684 / week on salary or fee basis).
To learn more about the FLSA, click to access the FLSA Guide here. For more help on classifying employees under FLSA guidelines, click through to see this article.
Executive, administrative, and professional employees are exempt from overtime requirements. These are salaried employees performing executive, administrative, or professional duties and make more than the salary threshold per year. In order to determine if an employee falls into one of these categories, he or she must meet a salary level test, as well as certain requirements.
In order to qualify for an executive exemption, an employee must pass the Salary Level Test as well as:
If an employee meets the previous three requirements as well as the Salary Level Test, then he or she is considered an Executive Exempt Employee and is not subject to FLSA minimum wage and overtime law.
In order to qualify for an administrative exemption, an employee must pass the Salary Level Test as well as:
If an employee meets the previous two requirements as well as the Salary Level Test, then he or she is considered an Administrative Exempt Employee and is not subject to FLSA minimum wage and overtime law.
In order to qualify for a professional exemption, an employee must pass the Salary Level Test as well as:
OR
If an employee meets one of the previous two requirements as well as the Salary Level Test, then he to she is considered a Professional Exempt Employee and is not subject to FLSA minimum wage and overtime law.
Tipped employees have to earn at least $135 per month in tips to qualify for the exemption for the Pennsylvania overtime rates. Tipped employees earning $135 per month in tips or more are also exempt from PA overtime.
Pennsylvania follows the 80/20 rule when it comes to tipped wages. Employees can qualify as tipped employees as long as that employee does not spend more than 20% of the 7-day previously established workweek performing duties that do not directly generate tips.
More information regarding Pennsylvania overtime wages for tipped employees can be found here.
In Pennsylvania, some employees have the option to work on Alternate Work Schedules (AWS). Overtime rules may vary depending on the specific situation.
An AWS is a type of work schedule that allows employees to work pre-established additional hours (beyond the regular 7.5 or 8.0 hours per day) on certain work days within a pre-established time period (i.e. week, pay period, month).
Simply put, an AWS is a compressed workweek schedule. For example, employees eligible for AWS can select a schedule that allows he or she to work 9 out of 10 workdays in a 2-week (14 days) period. When applied, employees can work:
Employees on AWS are eligible for overtime pay when working more than half an hour after a daily shift or more than 40 hours in a work week. Overtime is compensated at 1.5 times the regular rate of pay. However, hours worked on an AWS off day (AWSO) will be considered as regular time and thus not eligible for overtime.
Pennsylvania health care employers must adhere to special overtime rules under the Prohibition of Excessive Overtime in Health Care Act (Act 102). The law prohibits health care employers from requiring employees to work additional hours than what is agreed to. Act 102 includes employees:
AND
Employees may still work a shift over 8 hours as long as the employee agrees to an extended shift time and the extended shift is regularly scheduled. Employees can also agree to work any amount of overtime if he or she so choose.
Additional activities where Act 102 does NOT prohibit employee overtime include:
The following occupations are also exempt from the Pennsylvania overtime rates:
Please note that Pennsylvania does not have a daily overtime limit for employees working more than a certain number of hours per day to receive overtime pay.
It’s important for companies to learn more about Pennsylvania payroll processing and fully understand the compliance requirements. Employers struggling to maintain compliance with Pennsylvania Overtime requirements should contact a Pennsylvania Payroll company for help.
Companies that are struggling with managing overtime should consider modern time and attendance software, so that they may enhance their timekeeping processes.