What Is an Exempt Salaried Employee?

by Grace Ferguson ; Updated September 26, 2017

The United States Department of Labor, Wage and Hour Division, oversees the Fair Labor Standards Act, or FLSA, which sets the conditions for which a salaried employee is exempt. Unlike hourly employees who receive payment based on hours worked during the pay period, exempt salaried employees receive a predetermined amount that constitutes salary. Pay is usually weekly, biweekly or monthly, although this will vary depending on the job.

Identification

Exempt salaried employees receive payment on a salary basis and are exempt from FLSA overtime pay requirements, meaning the employer does not pay for overtime. To qualify for the exemption, an employee must fulfill the FLSA salary and job duties standards for her position. Exempt means that an employee is excluded from overtime; most hourly employees are not exempt from overtime, while most salaried employees are. An employee who receives payment on a salary basis, but does not meet FLSA exempt criteria specific to her occupation, is nonexempt and qualifies for overtime.

Test Criteria

An exempt salaried employee must pass both the FLSA salary level and job duties tests to qualify as exempt. For example, administrative, professional and executive employees must receive no less than a weekly salary of $455 and meet the act’s job duties requirements for their position.

For example, to qualify for exemption, an executive employee’s main duty must be managing the company or a recognized division within it, regularly overseeing the work of a minimum of two or more full-time employees and having the authority to employ and terminate other employees. If the latter is not within his job scope, he still qualifies for exemption if his recommendations or suggestions regarding employment and termination of employees, and those involving advancement or promotion, are given substantial consideration.

If necessary, an employer should consult the Wage and Hour Division for assistance in recognizing an exempt employee.

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Payment

An exempt salaried employee must receive full salary each payday, regardless of hours or days worked. If she does not work for the week, the employer has to pay her for that week. An employer cannot deduct salary because the company closed due to inclement weather or because the employee took a partial day off. Exempt salaried employees receive full salary unless a permissible deduction applies, such as overuse of benefit days and unpaid suspension. When allowable deductions apply, the employer makes them in full-day increments only.

Timekeeping and Recordkeeping

Because salaried employees are not paid based on work hours, many employers do not require them to punch in and out of a time clock like hourly employees. Still, an employer can make this request, if it's company preference. The FLSA does not require employers to keep a record of work hours for exempt salaried employees, but it must maintain records of the basis upon which they are paid.

About the Author

Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.

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