A salaried employee is someone who earns a fixed, predetermined amount of compensation that is paid on a recurring schedule, typically weekly, biweekly, semimonthly, or monthly. In many cases, salaried employees are exempt from overtime laws, meaning they don’t earn additional pay for working beyond 40 hours per week.
Salaried vs. Hourly Employees
The key difference between salaried and hourly employees lies in how they’re paid and whether they’re entitled to overtime.
- Salaried workers receive a consistent amount of pay per period, based on an annual salary (e.g., $70,000/year). Their pay does not fluctuate with the number of hours worked.
- Hourly workers, by contrast, are paid based on the number of hours worked and are typically nonexempt under the Fair Labor Standards Act (FLSA), making them eligible for minimum wage and overtime pay.
While most salaried employees are exempt, some are nonexempt and still qualify for overtime protections. Employers must review the FLSA’s criteria carefully before assigning an exempt classification.
Salaried Exempt vs. Salaried Nonexempt Employees
Salaried Exempt Employees
To be considered exempt under the FLSA:
- Employees must perform specific job duties (executive, administrative, or professional).
- They must earn at least $684 per week.
- They are not entitled to overtime.
- Their hours don’t need to be tracked.
- They usually receive their full salary each week, even if they work fewer hours.
- Employers may offer bonuses or additional compensation for extra work, but not in the form of overtime.
Salaried Nonexempt Employees
Even with a salary, some employees don’t meet the FLSA’s exemption criteria:
- These employees must track their hours worked.
- Their salary covers a specific number of hours.
- They are entitled to minimum wage (at least $7.25/hour federally) and overtime pay for hours worked beyond 40 per week.
- Employers must calculate and pay overtime when applicable.
Compliance With State Laws
While the FLSA sets federal standards, state labor laws may have additional or stricter requirements:
- States may mandate different minimum wages, overtime rules, or pay frequencies.
- Some require overtime for daily hours beyond a threshold or even double-time for excessive hours.
- For example, California has its own duties test and a higher salary threshold for exempt status—requiring more than 50% of time to be spent on exempt duties and a salary of at least twice the state minimum wage for full-time employees.
Best Practice for Employers Using Beyond
Employers leveraging platforms like Beyond can streamline classification, payroll, and compliance processes. However, it’s still essential to:
- Carefully evaluate both federal and state exemption tests.
- Follow the law that offers the greatest protection to employees when conflicts arise between state and federal requirements.
- Document employee classifications and salary agreements in writing.