Both hourly and salaried employees receive compensation for services provided to employers. The labor laws governing salaried and hourly employees, however, differ. While hourly employees receive a payment for actual hours worked, salaried employees receive a fixed annual wage regardless of the hours worked. Federal labor law does not specify that a salaried worker must work 40 hours.
Federal Labor Laws for Salaried Employees
Salaried employees receive payment based on an agreed-to annual amount regardless of the hours worked. Salaried employees typically have a 40-hour work week, but the employer can base salaried wages on fewer hours or more hours. Salaried employees include executives, administrative personnel, outside sales staff and professional employees. In most cases, a salaried employee is considered an exempt employee by the U.S. Department of Labor. According to federal labor laws, workers who perform manual or physical labor cannot have an exempt classification, even if paid a salary instead of an hourly wage.
Unlike hourly employees who must receive overtime pay for working more than 40 hours per week, most salaried employee do not qualify for overtime pay. Employers may require salaried employees to keep track of hours worked or to fill out a time sheet, but generally salaried employees will receive the same gross amount of compensation each pay date. Under federal labor laws, the company has no obligation to pay overtime to an exempt employee who works excess hours. An employer can, however, choose to compensate the salaried employee for working excess hours by paying him time-in lieu, a lump sum or a higher rate for the excess hours worked.
Salaried exempt employees do not qualify under the federal Fair Labor Standards Act for overtime pay. Under the law, employers may require an exempt employee to work a certain amount of hours per week in excess of 40 hours. An employer can also reduce the employee´s required working hours under some circumstances. For example, during an economic slowdown the employer can decrease an exempt employee's hours from 40 to 35, and reduce the employee’s salaried compensation accordingly. Employers have the right to schedule employees in accordance with basic business needs.
Salaried employees often receive standard company benefits such as sick pay and vacation days. This means salaried employees receive payment in full for holidays and sick days so long as the employee has accrued hours. If the salaried employee does not have accrued hours, the employer does not have an obligation to compensate the employee for this time off. Additionally, salaried employees who work less than the contracted hours in a given work week will still receive full salaried pay unless the employee performed no work during the week.
- United State Department of Labor: Wage and Hour Division (WHD); January 2011
- BT LG: Overtime for Exempt Employees
- United States Department of Labor: Basic Wage Standards
- United States Department of Labor: Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues