Getting paid a salary generally means getting the same amount of pay each week or each pay period no matter how many hours you work that week. For example, if you are paid on a salary basis, you get paid the same if you work 10, 30, 39, 40, or 46 hours per week (or any other number of hours). You must be paid more than $913 per week 47,476 per year) for your salary to satisfy the salary basis part of the test for overtime exemption. If you are paid a total annual compensation of $134,004 or more, with at least $913 per week ($47,476 per year) paid on a salary or fee basis, you will be exempt from overtime if you customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee. (See questions 7-26 below for more information.) These values will go into effect December 1, 2016. Until that date, to satisfy the salary basis part of the test for the exemption you must be paid more than $455 per week ($23,660 per year). If you are paid a total annual compensation of $100,000 or more with at least $455 per week, you will be exempt from overtime if you customarily and regularly preform at least one duty of an exempt executive, administrative, or professional employee.
Whether an employee is paid on a salary basis is not affected by whether pay is expressed in hourly terms (as this is fairly common in many payroll computer programs), but whether the employee is in fact paid a guaranteed minimum amount that is not subject to being docked based on the quality or quantity of work performed.
With a few exceptions, salaried employees cannot have their salary reduced based on the quality or quantity of work performed.
For example, if employees receive a salary of $600 per week when they work 40 hours, an employer cannot pay those employees $525 when they work 35 hours (effectively paying the employees $15/hour rather than a salary of $400 per week).
Also, if the employee is ready, willing and able to work, deductions may not be made for time when work is not available, such as, for example, weather or security-related facility closures.
If an employer makes improper deductions to an exempt employee's salary, it may destroy the salary basis of pay and may make the employee nonexempt and entitled to overtime. Employees whose salary is subject to reduction for reasons inconsistent with the salary basis of pay may no longer be considered under the law to be paid on a salary basis. Thus, if an employer actually does dock employee salaries, or if there is a specific employment policy requiring reductions in salaries in specified situations, the employer may destroy the salary basis of pay. For more information, see question 6.
The salary basis pay requirement for exempt status does not apply to some of the learned professions, such as lawyers, doctors, or school teachers. These jobs are exempt even if the employees are paid hourly. Another exception is for computer professionals (as defined under the law), who may be exempt if they are paid on a salary basis or if they are paid hourly at a rate of at least $27.63. This amount has not changed with the new overtime law.Further, the FLSA also allows some exempt employees to be paid on a fee basis, but this is a fairly rare circumstance.
However, under the new overtime rule which will not go into effect until December 1, 2016, the definition of salary basis now allows nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary test. Nondiscretionary bonuses and incentive payments are forms of compensation promised to employees to encourage them to work more efficiently or remain with the company. Examples of these bonuses which may now satisfy a percent of the standard salary test are: meeting set production goals, retention bonuses, and commission payments based on a fixed formula.
This new salary threshold will be updated every three (3) years to account for inflation. The goal is to maintain a level at the 40th percentile of full-time salaried workers in the lowest-wage Census region. The first salary threshold update will be January 1, 2020.