Salaried employee definition

Under the Fair Labor Standards Act (FLSA), employers pay salaried employees a predetermined amount on a regular basis. Nonexempt salaried employees may be entitled to overtime or a minimum wage, while exempt salaried employees generally are not.

Most employers set an annual salary and divide it equally among the paydays in a year. The number of pay periods determines the amount of each paycheck. An employee who’s paid monthly and earns $60,000 annually would receive 12 paychecks of $5,000 gross. If paid weekly, they’d earn about $1,153 gross per paycheck using timesheet rounding. This process simplifies the payroll process by rounding up or down.

Salaried employees might also receive other forms of compensation beyond their base salary, such as commissions, bonuses and perks.

What’s an exempt employee?

The FLSA classifies employees as either exempt or nonexempt. An exempt employee isn’t typically entitled to minimum wage or overtime pay. For most workers, this status depends on how often they’re paid and the nature of their work.

An employee’s job duties and salary, not their job title, determine their exemption status.

To qualify for exemption from the FLSA overtime and minimum wage protections, an employee must:

• Earn at least $58,656 per year or $1,128 per week ($151,164 per year with at least $1,128 per week for highly compensated employees)
• Receive a guaranteed and predetermined minimum pay
• Work primarily on executive, administrative or professional tasks, such as managing a team, budgeting or performing specialized knowledge work

Under these rules, some salaried employees may qualify as nonexempt and be entitled to overtime and minimum wage. Certain professionals, including teachers, doctors, lawyers and field sales representatives, are exempt based on the work they perform, even if they don’t meet these salary requirements.

Salary hours vs. hourly pay

When deciding whether a role should be hourly or salaried, consider advancement opportunities and job security. For example, salaried positions generally require a broader scope of responsibility or leadership skills, which can lead to promotion opportunities.

Salaried employees typically earn the same amount each paycheck, regardless of the hours worked. The employment agreement sets the employee’s annual compensation, which the company distributes evenly according to its pay schedule. Salaried jobs also typically include paid time off (PTO), healthcare benefits, life insurance, retirement plans and other perks.

An hourly employee is paid a set wage for every hour they work. The FLSA protects employees earning hourly wages. Depending on their exempt or nonexempt status, hourly employees may be entitled to overtime or minimum wage. Hourly workers may qualify for healthcare coverage, depending on how many hours they work and the company’s total number of employees.

While hourly employees clock in and out daily, salaried employees must complete the responsibilities outlined in their employment agreement, even if it requires working outside regular business hours. However, frequent overtime should not be the standard unless stated in the contract.

How does salary work?

FLSA-exempt employees often work flexible hours. Although their paychecks aren’t dependent on the hours worked, this arrangement offers flexibility with work arrangements and shift hours.

Clocking in and tracking hours

Salaried employees typically don’t need to clock in or complete a timesheet unless it’s for internal recordkeeping. For example, employers may prefer to observe time spent on individual projects to assess productivity.

While not guaranteed in all salaried roles, flexible hours may be available for some salaried employees, allowing workers to set their working hours and, depending on the business model, their work location. If your company doesn’t have core hours, employees might choose their shift, such as working 7 a.m. to 3 p.m. or 11 a.m. to 7 p.m.. They may also work from home, in the office or on the road while traveling for business.

How many hours should a salary employee work?

Most full-time salaried employees work a 40-hour work week. Salaried employees might occasionally work between 45 and 50 hours, depending on the company’s needs. Other weeks, their working hours might total less than 40 hours.

If a salaried job regularly requires over 50 hours per week, consider distributing the responsibilities across multiple positions to help improve retention and reduce burnout. This process can balance the salaried employee’s workload and enable them to focus on high-value tasks. For example, if you notice that a salaried manager is spending time on simple administrative work, your company might assign these tasks to an assistant.

Are there maximum or minimum salaried hour requirements?

Salaried positions don’t generally have specified maximum or minimum hour requirements. If an employee works over 40 hours per week, their pay doesn’t reflect the additional hours. Likewise, their pay remains the same if they work fewer than 40 hours per week.

By contrast, nonexempt employees are subject to specific overtime regulations. Employers need to track their hours and provide overtime pay when applicable.

Overtime for salaried employees

While salaried employees are usually considered FLSA-exempt, consider these factors regarding overtime.

Can salaried employees earn overtime?

According to the FLSA, salaried employees aren’t eligible for overtime pay for extra hours worked. However, you should consider any state, local or union regulations that may restrict employees from working overtime or require compensation for additional hours worked.

As an employer, you may include an overtime clause in your employment agreement for exempt employees, mentioning company policy on additional bonuses, time and a half pay, compensatory hours or days off. These amendments help ensure that salaried employees are treated fairly and compensated for regularly working more than 40 hours per week.

What are the restrictions on overtime?

Although the FLSA may not restrict the number of overtime hours an exempt salaried employee can work, you can check state, local or union laws. They may impose restrictions on the maximum number of hours an employee can work in a given period or when employers can legally require overtime.

Are salaried employees required to work weekends and holidays?

According to the FLSA, exempt salaried employees don’t generally receive additional compensation for working weekends and holidays, nor are there restrictions on these hours. However, you may allow employees to take state and federal holidays off without a holiday pay deduction.

When hiring for a salaried position, inform applicants if the role might require evening or weekend work. Providing advance notice helps candidates decide whether the role aligns with their expectations, which can also help reduce the risk of conflict and improve employee retention.

Benefits and deductions for salaried employees

Under the FLSA, exempt employees are entitled to their full salary for any week worked. Salaried employees are also subject to several benefits and pay deductions.

Vacation pay

Compensation and benefits packages for salaried employees often include PTO for vacation and personal days. If the package grants vacation or personal time off, each full or partial day absent is deducted from these days instead of the employee’s salary. Employees may also use their accrued sick days to cover time off, depending on your company policy.

Sick or disability absences

Employers can deduct exempt salaried employees’ time off for illness or disability according to the terms of their benefits package, if the company offers a bona fide benefits plan covering those absences. Most employers include about a week of sick days per year. According to the Bureau of Labor Statistics (BLS), 79% of private industry employees receive paid sick leave benefits.

Healthcare

If you have at least 50 full-time or full-time equivalent employees, your company may qualify as an Applicable Large Employer (ALE) under the Affordable Care Act (ACA) and its employer shared responsibility provisions. According to the ACA, ALEs must offer affordable health coverage that fulfills “minimum value” standards to full-time employees and their dependents.

Other pay deductions

The FLSA allows several additional deductions for exempt employees. For example, you may deduct pay for safety violations or unpaid disciplinary suspensions in accordance with FLSA guidelines. You might also be able to make deductions for certain types of unpaid time off, such as jury duty, witness duties or temporary military service.

Career advancement and growth for salaried employees

Your company’s growth and staffing plans may impact your choice between hiring hourly and salaried workers. Consider your company’s opportunities for career advancement and professional growth.

Opportunities for promotion

Salaried positions often involve decision-making, leadership, or problem-solving, making employees in these roles natural candidates for promotions and leadership opportunities. This position type might attract candidates eager to take on new responsibilities, lead projects or manage teams.

Professional development and training

If you plan to expand operations, hiring salaried employees and investing in their long-term professional development may be worthwhile. Consider providing opportunities such as:

• Mentorship programs
• On-the-job training
• Cross-functional projects
• Industry conferences
• Workshops
• Online courses
• Tuition reimbursement
• Financial support for degrees and certifications

These resources can help your salaried employees stay current with the latest trends and technologies in their field while also building new competencies. By supporting the professional growth of your salaried employees, your company can potentially foster higher job satisfaction, engagement and retention.