Wage and Hour Audit

A wage and hour audit is a systematic review of whether your pay practices comply with the FLSA and state wage-hour laws. It tests classification, overtime pay, timekeeping and records against what the rules require.

It is not a DOL investigation. You set the scope and timeline of an audit, and you fix what you find before an investigator or a complaint finds it.

What Does a Wage and Hour Audit Review?

Start with classification. In a May 14, 2026 technical amendment, DOL restored the 2019 rule text requiring most exempt executive, administrative and professional employees to earn at least $684 per week. Salary is one test; duties also matter. Roles that fail are non-exempt.

Then test overtime math. Under DOL's regular rate guidance, all compensation for hours worked goes into the regular rate unless an exclusion applies, so a bonus promised in advance raises the overtime rate.

Break rules are mostly state law. DOL's state table lists 21 states and jurisdictions with meal period rules, and 7 of them also have rest period rules, so check every state where you have staff.

Which Records Must You Keep?

DOL's recordkeeping fact sheet, a summary of 29 CFR Part 516, says employers must keep payroll records for at least three years. Time cards, wage rate tables, schedules and deduction records must be kept for two years.

The same sheet requires hours worked each day, total weekly hours, the regular rate, overtime earnings, deductions and payment dates, and says the information must be accurate. An audit should confirm these exist and match payroll.

How Does a DOL Investigation Differ From an Audit?

According to DOL's fact sheet on visits, an investigator presents credentials, explains the process and records needed, examines payroll and time records, and privately interviews employees. A final meeting covers violations and any back wages.

WHD does not have to announce an investigation in advance. An internal audit lets you find and correct pay problems first, on your own schedule and with your own records team.

How Do You Run a Wage and Hour Audit?

Define the scope first: sites, job groups and the period to review. Then sample payroll and time records for each group instead of reading every record at once.

• Recalculate overtime for sampled workweeks and compare it to what was paid.
• Match punches to schedules to spot unpaid early starts and late stops.
• Ask managers how off-the-clock requests actually get handled.

Remediate by correcting classifications and paying back wages owed, then document findings, fixes and dates. Fold the review into your broader HR compliance audit cycle.

How Does HR Cloud Help With Wage and Hour Audits?

HR Cloud's time tracking has employees enter time in the platform or on a mobile device, with customizable policies, manager approval and reports of past time entries for audits and record keeping. It supports the records side; the legal review stays with your team.

Time can go to your payroll vendor through its payroll integrations, and its HRIS lists an audit trail among its features. To see the reports, request a demo.

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Frequently Asked Questions

Q: How often should you run a wage and hour audit?

A: Annually is a common cadence. Add a review after changes such as opening in a new state, changing a pay plan, or switching timekeeping or payroll systems.

Q: Who should run the audit?

A: HR usually leads, with payroll and finance supplying data. Some employers bring in outside counsel or an independent reviewer so findings and fixes are handled by people who do not own the process.

Q: How do you calculate the regular rate?

A: Divide total compensation for the workweek, except statutory exclusions, by total hours worked that week. DOL Fact Sheet 56A gives this formula.

Q: Do you have to use a time clock?

A: No. DOL says employers may use any timekeeping method, such as a time clock or employee-written times, as long as it is complete and accurate.

Q: Is there a higher pay threshold for highly compensated employees?

A: Yes. The restored 2019 rules set a total annual compensation threshold of $107,432 for certain highly compensated employees, per DOL's May 2026 announcement.

Q: What if the audit finds underpayments?

A: Calculate what is owed, correct the practice and document it. DOL's PAID program offers employers a route to self-report and resolve potential minimum wage and overtime violations.