What is a salaried employee?

Salaried employee definition and meaning

A salaried employee receives a fixed, predetermined amount of pay for performing their work duties, which is usually paid on a weekly, biweekly, or semimonthly basis, though some (higher earning) salaried employees are paid monthly. Most salaried employees are exempt from overtime pay regulations. As a result, they normally do not receive extra pay for working more than 40 hours in a week.

Learning more about salaried employees

Salaried employee vs hourly employee

A salaried employee, also known as a salaried worker, is paid a fixed amount per payroll cycle. This amount is typically established as an annual salary (e.g., $70,000 per year) at the time of hiring or during the performance review process. This annual amount is then divided into equal payments to be made according to the employee’s pay frequency (e.g., biweekly or semimonthly).

Most salaried employees are excluded from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). These salaried employees are referred to as “exempt.” Also known as white-collar employees, exempt employees typically work in executive, administrative, and professional roles.

Conversely, an hourly employee is paid based on their agreed-upon hourly rate, not a fixed sum. Unlike most salaried employees, most hourly employees are not excluded from the FLSA’s minimum wage and overtime pay regulations. As a result, they are termed “nonexempt.”

Although most salaried employees are exempt, a salaried employee can be nonexempt. In the latter case, they are eligible for both minimum wage and overtime pay. Therefore, it’s important to properly examine the FLSA’s rules before classifying a salaried employee as exempt or nonexempt.

Salaried exempt vs salaried nonexempt

Salaried exempt

An employee is salaried exempt if they perform the required FLSA job duties plus earn at least the minimum salary requirement of $684 per week. 

In addition:

• They should not receive overtime pay if they work more than 40 hours in a week.
• They do not have to log or track their work hours.
• They must typically receive their full salary if they perform any work during the week.
• They can be required to work a specific number of hours per week (e.g., 35 – 40).
• Their employer can deduct from their salary only if the FLSA permits the deduction.
• In some cases, they may receive additional compensation – such as a bonus or flat sum – for working beyond the typical workweek (just not in the form of overtime pay).

Salaried nonexempt

An employee is salaried nonexempt if they do not fulfill the FLSA job duties test, even though they earn a salary. For example, a salaried administrative worker who does not perform the administrative duties outlined in the FLSA is nonexempt. The fact that they are nonexempt makes them eligible for minimum wage and overtime under the FLSA.

In addition:

• They must adhere to certain timekeeping requirements.
• Their salary covers a fixed number of hours, which they are expected to work.
• They are entitled to at least the minimum wage – $7.25 per hour under the FLSA. This comes in the form of a fixed salary (e.g., $50,000 per year).
• They must receive overtime pay if they work more than 40 hours in a week.
• They must record their work hours in case they become eligible for overtime.

State law and salaried employees

Along with reviewing the FLSA, its important to check state laws for any salary-related legislation.

Here are some things to keep in mind:

• Salaried employees are most often paid biweekly or semimonthly. However, before assigning a pay frequency for your salaried employees, be sure to see if your state has minimum payday laws. You can pay more frequently than the state-mandated time frame, but not less often.
• Some states have their own minimum wage and overtime laws, separate from the FLSA. If an employee is salaried nonexempt, they may be entitled to a higher minimum wage and/or overtime under state law. Some states require overtime for hours worked over a certain amount for the day or week. Keep in mind that a few states mandate double-time pay as well, for work hours exceeding a specific amount.
• States such as California and New York have overtime exemption laws, separate from the FLSA. For example, California has its own job duties tests and salary threshold. As noted by CalChamber, “For most exemptions [in California], more than 50 percent of an employee’s time must be spent performing exempt job duties.” Furthermore, most exempt employees must earn no less than twice the state minimum wage for full-time employment, on a monthly basis.

Generally, if a salaried employee is subject to both the FLSA and state wage and hour laws, the employer should utilize the law that is most beneficial to the employee.