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An HR Glossary for HR Terms

Glossary of Human Resources Management and Employee Benefit Terms

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Salary Basis Test

What Is the Salary Basis Test?

Federal law states that all employees are considered eligible for overtime pay unless they meet certain requirements for exemption. The salary basis test is a series of stipulations that may exempt an employee from being eligible for overtime pay. The salary basis test says the employee must be paid a predetermined, fixed salary. This means their salary cannot go up or down based on the quality or quantity of their work.

There are “permissible” and “impermissible” reductions in salary basis pay. Permissible reductions do not affect the exemption status of an employee, but impermissible reductions can affect the exemption status.

Certain jobs dictate that the employee is exempt regardless of the salary basis pay requirement. Doctors, lawyers, and schoolteachers, for example, are all exempt even if they are paid an hourly wage rather than salary.

What Are the Qualifications to Be a Salaried Employee?

Any worker that is paid a fixed amount of money by their employer is considered a salaried employee. The salary is paid on a regular basis, either by monthly paycheck or bi-weekly paycheck. Salaried employees must be paid for any week they work. These types of employees usually are not entitled to overtime pay, unless they earn less than $23,660 annually.

Misclassifying an employee can lead to fines and penalties from the government. The employee is entitled to unpaid overtime if they are misclassified by their employer. Therefore, employers should make sure to review and understand the qualifications of a salaried employee at the state level before classifying a salaried employee.

What Is the Minimum Amount for Salary?

Federal law requires that salaried employees must be paid a minimum of $455 per week, or $23,660 annually in order to be exempt from overtime pay. Though employers can pay their workers less than these amounts, the employees will be entitled to overtime pay.

Are Salaried Employees Entitled to Overtime Pay?

According to the Fair Labor Standards Act (FLSA), most salaried employees are also considered exempt employees. This means they are not entitled to overtime pay at 1.5 times their regular pay rate. The only salaried employees who are entitled to overtime pay are those that make less than $455 per week, or $23,660 annually, or who do not perform exempt duties.

Many states have their own set of requirements pertaining to wages and overtime pay. Employers must follow federal and state laws regarding overtime pay for salaried employees.

There are also laws regarding “white collar” exemptions. These laws are dictated by the state and have special requirements for an employee to qualify for another level of exemption.

Do Salaried Employees Have to Work 40 Hours a Week?

Salaried employees are not required by law to work 40 hours per week. A 40-hour work week is typical of a salaried employee, but their hours can change day to day or week to week without any legal repercussions or changes in a paycheck. An employer legally has the ability to ask an employee to stay late or allow them to leave early without changing their wages.

Salaried employees will get the same paycheck regardless of how many hours they work in a week. For example, a salaried employee might work 37 hours one week, 38 hours one week, and 43 hours another week. Despite the fluctuation in hours, they will still receive the same paycheck in the upcoming pay period.

Can a Salaried Employee Refuse to Work Overtime?

According to federal law, a salaried employee cannot refuse to work overtime. Salaried employees agree to a job that has the same pay regardless of hours of work or quantity of work completed each week. Employers can require a salaried employee to work more than 40 hours per week, and they are not required to pay that employee overtime pay. However, a salaried employee who feels overworked can discuss the situation with their boss and seek a compromise.

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