Salaried employees

When building a workforce, employers must determine if they want to pay employees via salaries or hourly wages. The decision ultimately depends on the organization’s structure, the industry, individual job duties and applicable labor laws, such as the Fair Labor Standards Act (FLSA). Yet, before weighing those factors, business owners who are new to the hiring process must first understand the salary employee definition.

What is a salaried employee?

Salaried employees are workers who receive a predetermined amount of base pay each payroll cycle. They can either be exempt or non-exempt from the FLSA and state wage and hour laws. Those who are non-exempt are entitled to be paid at least the minimum wage and overtime pay if they work more than 40 hours in a workweek.

To be correctly classified as salaried exempt, employees must earn a specific minimum salary and pass job duties tests. Employers should refer to the FLSA for more detailed information on exemption criteria.

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How many hours do salaried employees work?

The FLSA uses 40 hours per week as the threshold for determining when non-exempt employees, whether hourly or salaried, are entitled to overtime pay. Depending on their organization’s goals or their level of responsibility, some salaried employees may work beyond 40 hours.

Do salaried employees need to work 40 hours a week?

Employers may expect salaried employees to work at least 40 hours per week, but it’s not required by the FLSA. If exempt employees are stuck in traffic, have to run an errand or need to leave the office or workplace early, they still get paid their full salary.

How many hours can a salaried employee be made to work?

The total number of hours a salaried employee may be expected to work is up to the employer’s discretion. However, it’s important to remember that non-exempt, salaried employees must be paid the applicable overtime rate for hours worked in excess of 40 per workweek. Even if the employees are exempt, employers may want to maintain a positive work-life balance to avoid having a disengaged and burnt-out workforce.

Switching between salaried and hourly

Employers who are reorganizing departments may sometimes reassess the roles of their hourly and salaried employees and adjust their classification. Such moves, however, may result in labor law violations if not done correctly and can be a contentious subject with workers. For instance, hourly workers who become exempt might resent that they will no longer be eligible for overtime pay. And salaried employees may view moving to an hourly role as a demotion.

To avoid potential problems, employers should consult legal counsel before re-classifying employees.

How does salary pay work?

A salary is usually expressed as an annual sum, e.g., $50,000 per year, and is paid over the course of a payroll calendar that meets pay frequency laws. Some of the pertinent details to this process include the following:

• With some exceptions, exempt employees must receive their full salary each week they perform at least some labor, irrespective of the total days or hours worked.
• Employers generally cannot reduce an exempt employee’s salary in a workweek due to variations in the quality or quantity of work.
• Non-exempt, salaried employees are entitled to overtime pay if they work more than 40 hours per week.

Labor laws for salaried employees

The FLSA governs salary basis requirements and exemption statuses at the federal level. Individual states may have their own laws for salaried employees, which employers should familiarize themselves with or seek legal counsel for more information.

What happens when a salaried employee works overtime?

Exempt, salaried employees are not entitled to overtime. So, unless their employer voluntarily offers incentives, exempt workers do not receive any additional compensation for working outside regular business hours. Non-exempt, salaried employees, on the other hand, must be paid the applicable premium rate if they work overtime.

Calculate pay for salaried vs. hourly employees

Regular pay for a salaried employee is calculated by dividing the annual salary by the number of pay periods. For example, if an employee has an annual salary of $60,000 and is paid semi-monthly, that individual’s salary per pay period would be:

$60,000 / 24 = $2,500

For hourly employees, employers must multiply the hourly rate by the number of hours worked. So, if an employee is paid $12 per hour and works 40 hours per week, that individual’s total weekly earnings would be:

$12 x 40 = $480

Reminder: Employers must also pay overtime when non-exempt employees (salaried or hourly) work more than 40 hours in a workweek.

Frequently asked questions about salaried employees

What types of jobs are typically classified as salaried exempt?

Salaried, exempt positions tend to be executive, administrative, professional, computer or outside sales roles. However, job titles alone are not sufficient for determining exemption status. Employers must pay the employee more than the minimum salary required by the FLSA and apply specific job duties tests.

Can employers deduct the pay of salaried, exempt employees?

An employer cannot reduce an exempt employee’s salary for variations in quantity or quality of work, but deductions for other reasons may sometimes be permissible. Examples include certain types of absences, penalties for major safety or security violations, and unpaid disciplinary suspensions. Employers should refer to the FLSA for more specific guidelines.

Do salaried employees get paid if they don't work?

As long as exempt employees perform some work during a given workweek, they are generally entitled to their full salary for that week. If they perform no labor whatsoever throughout a workweek, their employer is not required to pay them.

Do salaried employees need to clock in?

Non-exempt, salaried employees need to log their hours so their employer knows when they become eligible for overtime. Exempt employees do not.

What are the most hours a salaried employee can work?

Provided that the employees are 16 years of age and older, the FLSA does not limit the number of hours employers may ask their people to work each week.

Can employers require exempt employees to work weekends?

The FLSA does not restrict weekend work, nor does it require premium pay for it on its face. Only if the employees are non-exempt and the weekend hours equate to more than 40 hours per week, do they receive overtime pay. Thus, exempt employees may be required to work weekends with no additional compensation.

Can an employer force employees to work overtime?

Employers generally may form mandatory overtime policies as long as they don’t violate collective bargaining agreements. Before implementing such policies, it may be advisable to seek legal counsel.

This guide is intended to be used as a starting point in analyzing salaried employees and is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.