Salary Basis Test

One of the most important responsibilities of employers is to take care of their employees. They make sure that employees are given what is due them and that they enjoy rights and protections in the workplace. According to federal law, all employees must be paid for the hours that they worked overtime. It also requires that employees be paid at least the minimum wage. This is applicable unless an employee is considered exempt. 

When it comes to determining if an individual can be classified as an exempt employee, it comes down to three elements: how much they are paid, how they are paid, and the kind of duties they do at work. In this article, let’s read more about the first two elements. How will you know if an employee may be exempt based on how and how much they are paid?

What is the meaning of a salary basis test? 

The salary basis test refers to the series of stipulations that may render an employee exempt from minimum wage and overtime pay. When a person is paid on a salary basis, this means that the employee receives a fixed and predetermined salary. The amount that the employee receives is regular and cannot be increased or reduced based on the quality nor the quantity of work performed. 

A note for employers, according to the Department of Labor, there are situations when it is permissible or allowed for employers to make deductions from an exempt employee’s pay. Examples are when employees take personal time off that is not for sickness or disability. IN this case, the time off work may be taken from their available vacation days or personal time. For more detailed information on deductions, it is best to check the DOL’s Wage and Hour Division website. 

Furthermore, certain jobs render an individual exempt regardless of the salary basis requirement. Examples of such are lawyers, doctors, outside sales employees, and schoolteachers. They are considered exempt despite being paid on an hourly basis and not a salary. 

How can an individual be considered a salaried employee?

For an individual to be deemed a salaried employee, the employee must receive a regular, fixed amount of pay or compensation. This is referred to as a “salary” from their employer. The pay period can differ depending on the employer. It can be monthly, weekly, or bi-weekly. The pay of salaried employees is not affected by the number of hours that they work. For example, in a typical 40-hour workweek, salaried employees get the same compensation regardless if they work for 45 hours or 35 hours. 

Salaried employees do not have to work the typical 40-hour workweek. Their work hours can vary depending on their work responsibilities. Since their salary is not based on how many hours they work, salaried employees generally do not have to follow a strict work schedule. They do not have to clock in for work or keep a timesheet for submission. 

Is there a minimum amount of compensation a salaried employee must receive to be an exempt employee?

Yes, there is a minimum amount of compensation that salaried employees must receive to be considered exempt. According to the law, salaried employees are exempt if they are paid at least $684 fixed salary per week or $35,568 per year. Additionally, they must also perform specific job duties defined by the Fair Labor Standards Act (FLSA).

Are salaried employees given overtime pay? 

The answer would depend on whether a person is salaried exempt or salaried non-exempt. Based on FLSA standards, salaried exempt employees are not entitled to overtime pay. Meaning, they are paid a fixed salary regardless of the number of overtime hours that they perform. 

In contrast, salaried non-exempt employees are entitled to overtime pay of not less than time and a half or 1.5 times the regular rate for hours worked above 40 hours in a single workweek. Salaried non-exempt employees can be those who are paid on a salary basis but less than $684 fixed salary per week or $35,568 per year or those whose job duties are not considered exempt job duties. 

If you are an employer, always check the state laws regarding wages and overtime pay. A state may have its own requirements regarding salaried employees.