Salaried employee definition

According to the Fair Labor Standards Act, salaried employees are paid a set amount of money on a regular basis. Depending on “exempt” or “non-exempt” status, salaried employees may or may not be entitled to overtime or a minimum wage.

Most employers set an annual salary and divide it equally between all the paydays in a year. An employee who earns a $60,000 annual salary paid monthly would receive 12 paychecks of $5,000 gross. If they’re paid weekly, they’d earn about $1,153 gross per paycheck.

Related: Understanding Base Salary: A Guide for Employers

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 are paid and the type of work they do.

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

• Earn at least $43,888 per year or $844 per week ($132,964 per year or $844 per week for highly compensated employees)
• Receive a guaranteed and predetermined minimum pay
• Work mainly on executive, administrative or professional tasks

Under these rules, some salaried employees could potentially qualify as nonexempt and be entitled to overtime and minimum wage.

Salary hours vs. hourly pay

Employees who earn hourly wages are protected by the FLSA, which means they’re paid for every hour they work. Depending on their exempt or non-exempt status, hourly employees may or may not be entitled to overtime or minimum wage.

Depending on how many hours they work and the total number of employees at the company, hourly workers may or may not qualify for healthcare coverage.

Salaried employees typically earn the same amount each paycheck regardless of the hours they complete. Their annual compensation is pre-determined, included in their employment agreement and distributed evenly according to the company’s pay schedule. Salaried jobs also usually include additional compensation in the form of paid time off, healthcare benefits, life insurance and other benefits.

While hourly employees clock in and out each day, salaried employees must complete the responsibilities in their employment agreement—even if they need to work outside regular business hours. Because they’re exempt from FLSA, they may have inconsistent or extended work hours. However, exempt employees are entitled to certain rights according to the U.S. Department of Labor and state or municipal laws.

How does salary work?

FLSA-exempt employees often work flexible hours, which has a few other implications for your business.

Clocking in and tracking hours

Salaried employees don’t typically need to clock in or complete a timesheet. Instead, they work the number of hours necessary to complete their required tasks.

Some salaried employees set their own hours. This might include working 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 40-hour weeks. Salaried employees might occasionally work between 45 and 50 hours, depending on the company’s needs. Other weeks, they might put in less than 40 hours.

If a job regularly requires more than 50 hours per week, consider distributing the responsibilities across multiple positions. For example, if a salaried manager spends 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 have specified maximum or minimum hour requirements. If an employee works more than 40 hours per week, their pay won’t reflect overtime hours. Likewise, if they work fewer than 40 hours per week, their pay will stay the same.

Overtime for salaried employees

While salaried employees are usually considered FLSA-exempt, there are other factors to consider.

Can salaried employees earn overtime?

According to the FLSA, salaried employees aren’t entitled to overtime pay for extra hours worked. However, 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 choose to include an overtime clause in your employment agreement for exempt employees. The clause might mention additional bonuses, time-and-a-half pay or compensatory hours or days off.

What are the restrictions on overtime?

Salaried employees who are classified as exempt under the FLSA are not usually entitled to overtime pay, regardless of how many hours they work.

Certain state, local or union laws may impose restrictions on things like the maximum number of hours an employee can work in a given period, or the conditions under which mandatory overtime can be enforced.

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. There are also no restrictions on these hours. However, you may decide to give employees state and federal holidays off without a holiday pay deduction.

When hiring for a salaried position, communicate any potential for evening or weekend work. Providing advance notice helps candidates decide whether the role is the right fit and reduces the risk of conflict or turnover.

When are salaried employees required to work overtime?

Salaried employees may need to work overtime to fulfill the terms of their employment. There are generally no restrictions preventing overtime for FLSA-exempt workers.

Benefits and deductions for salaried employees

Under the FLSA, exempt employees are entitled to their full salary for any week in which they perform work. Salaried employees are also subject to a few benefits and pay deductions.

Vacation pay

Compensation or benefit packages for salaried employees often include paid time off for vacation and personal days. If the package grants vacation or personal time off, each full or partial absent day is deducted from these days rather than the salary. When your company policies allow, an employee can also use their accrued sick days.

Sick or disability absences

Employers can deduct exempt salaried employees’ time off for illness or disability according to the terms of their benefits package. Most employers include about a week of sick days per year. According to the Bureau of Labor Statistics, 79% of private industry employees receive paid sick leave benefits.

Healthcare

If you have at least 50 full-time 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 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, disciplinary suspension or unpaid time off, such as jury duty, witness duties or temporary military service.

Related: Hourly to Salary Calculator for Employers

FAQs about salaried employment

What are the benefits of hiring a salaried employee?

Hiring a salaried employee is one way to cover your company’s core jobs while stabilizing labor costs. Since salaried workers typically receive the same pay each week, they help streamline your payroll procedures. Consistent compensation can also help you attract high-quality candidates.

When would you want to hire an hourly worker over a salaried worker?

If your company’s labor demand is inconsistent, you may prefer hourly workers over salaried employees. This can help you manage labor costs, particularly if you don’t anticipate many overtime hours.