What is a Salary Employee?

Image by Bailey Mariner © The Balance 2019 

A salary employee (also known as a salaried employee) is a worker who is paid a fixed amount of money or compensation (also known as a salary) by an employer. For example, a salaried employee might earn $50,000/year.

What Does Salary Mean?

If you're an employee who is paid a salary (instead of an hourly rate), you will receive a set amount of compensation on a weekly or less frequent basis.

Employees who are compensated on a salary basis receive their full pay, regardless of how many hours they work in a week. 

Salaried employees are typically paid by a regular, bi-weekly, or monthly paycheck. Employees who are paid a salary are often also known as exempt employees, according to the Fair Labor Standards Act (FLSA).

Federal Guidelines for Salaried Employees

Effective January 1, 2020, employees must earn at least $684 per week ($35,568/year), receive a salary, and perform particular duties (as defined by the FLSA) to be considered exempt from overtime requirements.

State Guidelines for Salaried Employees

Some states have enacted more generous overtime laws and higher thresholds for requiring overtime pay for salaried workers. In those locations, the standard (federal or state) that applies is whichever would pay the higher amount.

For example, in California, in order to classify a salaried employee as exempt from overtime requirements, employers must pay the worker at least twice the prevailing minimum wage. This is currently $13 per hour for larger employers (with 26 or more employees) and $12 per hour for smaller employers.

All other employees earning less than $54,080 annually at a large employer would automatically be eligible for overtime regardless of job responsibilities or job title. Non-exempt employees in California must be paid overtime wages equivalent to at least 1.5 times the California minimum wage of $13 per hour (for large employers), or $19.50 per hour.

In New York, as another example, there are salary thresholds that require most employees who earn below a specific amount annually to be paid on an hourly basis and receive overtime pay. The salary threshold varies between New York City at $58,500 annually, Nassau, Suffolk and Westchester counties at $50,700, and the remainder of the state at $46,020.

Check with your state’s department of labor for the latest overtime provisions in your area. A salary employee’s earnings are often supplemented with paid vacation, holidays, healthcare, and other benefits.

Salary Employees vs. Hourly Employees 

There are many differences between a salaried employee and an hourly employee. First, while a salaried employee receives a fixed amount of money, an hourly employee receives an hourly wage for each hour worked. Therefore, salary workers who meet the criteria as exempt employees do not have to keep track of their hours in the way that hourly employees do; for example, they do not have to sign a daily timesheet.

Most exempt salaried employees do not receive overtime pay. Salaried employees are paid their salary regardless of how many hours they work during a workweek.

This means that many high-paying positions do not receive extra wages, such as time and one-half for working over 40 hours a week. However, some lower salary positions are still eligible for overtime pay, based on state and federal laws. 

On the other hand, hourly employees are typically able to receive time and one-half of their hourly wage for every hour of overtime work. Some employers even pay double time for holidays, although this is not mandatory.

Also, most salaried employees are considered exempt employees, while most hourly employees are considered non-exempt employees.

There are, however, some exceptions to this rule. For example, there are some exempt employees who are not salaried (such as those who receive a fee for a particular job, like a computer technician). There are also some non-exempt employees who are salaried, but their job duties fall under the definition of non-exempt.

The Pros and Cons of a Salary Position

There are some possible disadvantages to a salary position. For example, you are typically not able to earn overtime pay. That means you often work extra hours for no additional salary.

It is also harder to separate home and work life when you have a salary position. In general, with a salary position, you are often expected to work extra hours to complete tasks (without extra pay), which can cut into your personal life.

That being said, there are many benefits to a salaried position. Salaried positions guarantee a dependable, exact, and expected amount on each paycheck. This can provide a sense of security to a salaried employee.

You are also more likely to receive benefits in a salaried position, particularly a full-time salaried position. These benefits often go beyond healthcare to include retirement contributions and paid vacations.

Salaried positions often have a higher perceived status and job titles that seem more professional. A work history containing professional job titles can serve as a more marketable foundation for future professionally-oriented jobs.

How to Know If a Salary Position Is Right for You

If you value the security of a regular paycheck, a salary position may be ideal for you. You may also want to search for salary positions if you want more extensive benefits. If the apparent status of a job is an important psychological factor for you, then you might prefer a salaried job.

However, if you value keeping a clear separation between work and home life, and if you dislike the idea of working extra hours for no extra pay, you might prefer an hourly position.

The information contained in this article is not legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. 

Article Sources

  1. U.S. Department of Labor. "Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act," Accessed Dec. 4, 2019.

  2. U.S. Department of Labor. "Final Rule: Overtime Update," Accessed Dec. 4, 2019.

  3. State of California. Department of Industrial Relations. "Overtime," Accessed Dec. 4, 2019.

  4. New York State Labor Department. "Administrative Employee Overtime Exemption Frequently Asked Questions (FAQ)," Accessed Dec. 4, 2019.