Salaried employee
A salaried employee is paid a fixed amount each pay period, generally the annual salary divided evenly, rather than a rate times hours worked.
- LAW
- 29 CFR 778.113; 29 CFR Part 541
- BOUNDARY
- The workweek, even on a monthly salary
- FORMULA
- Weekly salary ÷ hours it is meant to cover
- WATCH FOR
- Treating salaried and exempt as synonyms
Salary is a pay basis, not an overtime status. Under the FLSAFLSA. The Fair Labor Standards Act (FLSA) is the federal law setting minimum-wage, overtime, recordkeeping, and youth employment standards for covered employment.Click to open the term, exempt status generally requires salary basis, salary level, and duties tests together. A salaried employee who fails any of them is generally non-exempt and owed overtime for hours over 40 in a workweekWorkweek (FLSA). A workweek under the Fair Labor Standards Act is a fixed, regularly recurring period of 168 consecutive hours used to compute overtime.Click to open the term. You then find the regular rate by dividing the weekly salary by the hours it is meant to cover.
How is salary pay calculated?
Gross payGross pay. Gross pay is the total amount an employee earns in a pay period before taxes, benefits, and other deductions are subtracted.Click to open the term for a period is typically the annual salary divided by the number of pay periodsPay period. A pay period is the recurring block of time, such as a week or a month, for which you calculate and pay wages.Click to open the term in the year. So a semimonthly salaried employee receives the same amount 24 times a year, regardless of the exact days worked in each period. Some earnings, such as a bonus, commission, or a non-exempt employee’s overtime premium, are added to the salary for that period. Overtime, though, runs on the workweek, so convert a non-exempt salary to its weekly equivalent first.
| PAY FREQUENCY | WEEKLY EQUIVALENT |
|---|---|
| Weekly | The salary itself |
| Biweekly | Salary ÷ 2 |
| Semimonthly | Salary × 24 ÷ 52 |
| Monthly | Salary × 12 ÷ 52 |
How do you figure overtime on a salary?
Under federal rules, take a $350 salary meant to cover a 35-hour week: the regular rate is $10. Hours 36 to 40 earn $10 each, and each hour over 40 earns $15. California instead divides a full-time non-exempt employee’s weekly salary by 40. Longer periods convert first: $1,560 a month for 40-hour weeks is $360 a week, a $9 regular rate.
- 01
Convert the salary to its weekly amount with the table above.
- 02
Divide by the hours the salary is meant to cover to find the regular rate.
- 03
Pay the regular rate for any uncovered hours up to 40, such as hours 36 to 40 on a 35-hour salary.
- 04
Pay 1.5 times the regular rate for each hour over 40.
What is the fluctuating workweek method?
Under federal rules, the fluctuating workweek method pays a non-exempt employee a fixed salary for all hours worked, whether few or many. Hours must vary weekly, with a clear mutual understanding that the salary covers them all. The salary must reach the minimum wageMinimum wage. Minimum wage is the lowest hourly rate you may legally pay a covered employee, set by federal, state, and sometimes local law.Click to open the term for every hour in the longest weeks. The regular rate then changes weekly: salary plus other includable pay, divided by hours worked. Overtime adds at least half that rate per hour. State law can bar it: California deems a fixed salary to cover only non-overtime hours.
Frequently asked
- 29 CFR Part 778, Overtime Compensation
- California Labor Code §515
- U.S. Department of Labor, Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)
- U.S. Department of Labor, State Payday Requirements
General information, not legal or tax advice. Apply current federal and state rules with qualified guidance.